-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ItVEvSv9qW4diugjbstcPNwC9lFGbHSqTG0RS1YTTItMwWAy2zqcoeucYXAUa9iz IUUKtLxNG+fyE2cJspAP/Q== 0000002070-95-000017.txt : 19951002 0000002070-95-000017.hdr.sgml : 19951002 ACCESSION NUMBER: 0000002070-95-000017 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACME ELECTRIC CORP CENTRAL INDEX KEY: 0000002070 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 160324980 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08277 FILM NUMBER: 95576706 BUSINESS ADDRESS: STREET 1: 400 QUAKER RD CITY: EAST AURORA STATE: NY ZIP: 14052 BUSINESS PHONE: 7166553800 10-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ________ to ________ Commission file number 1-8277 ACME ELECTRIC CORPORATION (Exact name of registrant as specified in its charter) STATE OF NEW YORK 16-0324980 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 QUAKER ROAD, EAST AURORA, NEW YORK 14052 (Address of principal corporate offices) (Zip Code) 716/655-3800 (Telephone Number) Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common Stock - Par Value $1.00 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES X NO ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant as of September 12, 1995. Common Stock, Par Value $1 Per Share, $54,105,166 Indicate the number of shares outstanding of each of the registrant's classes of common stock as of September 12, 1995. Common Stock, Par Value $1 Per Share, 5,003,946 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, are incorporated by reference into Parts I and II. Portions of the Registrant's definitive proxy statement for the annual meeting of shareholders to be held on October 27, 1995, are incorporated by reference into Part III. PART I ITEM 1 - BUSINESS BUSINESS The Registrant was duly organized and incorporated under the laws of the State of New York on April 26, 1946. Its sole line of business is the design and manufacture of power conversion equipment for electronic and electrical systems. Principal markets encompass the computer, office copier, information systems, military, aerospace and communications industries and a variety of industrial, commercial and residential fields for applications that require conversion of electrical energy from one useable state to another. Products are distributed to customers through the Registrant's sales force, independent sales representatives and wholesale distributors. The business of the Registrant is not seasonal in nature. COMPETITION Competitive conditions within the power conversion industry are intense. The Registrant competes with many other companies, some of which have far greater resources than the Registrant. The principal methods of competition within the industry are price, service and product performance. To meet this competition, the Registrant attempts to maintain high standards of engineering, manufacturing and customer service. Due to the number and variety of competitors, reliable data relative to the Registrant's competitive position within the power conversion industry would be difficult to develop and is not known nor believed to exist. CUSTOMERS Two customers of the Company accounted for 13.4% and 10.6% of fiscal 1995 sales, respectively, one of which also accounted for 10.6% of June 30, 1995, accounts receivable. In comparison, there was one customer of the Company that accounted for 10.0% of fiscal 1994 sales and no customers were above the 10% threshold in 1993. BACKLOG The backlog of orders believed to be firm totaled approximately $20,954,498 at June 30, 1995, compared with approximately $16,697,000 at June 30, 1994. The change in backlog as of June 30, 1995, compared with the backlog as of June 30, 1994, reflects increased order volume from a major OEM customer at the Electronics Division, combined with several significant development contracts received at the Aerospace Division. Backlog orders at June 30, 1995, are generally expected to be filled during the current fiscal year. -2- RAW MATERIALS The Registrant purchases materials in a semi-finished state from other manufacturers and distributors. Availability of materials is considered adequate to maintain current production levels. PATENTS The Registrant holds several technical patents and trademarks and is a party to certain patent applications. The extent of the effect of such patents and trademarks is, however, in the opinion of management, not material at this time. LICENSES The Registrant is a party to several license agreements. The only material license, providing for the sale and manufacture of a proprietary fiber nickel cadmium battery (FNC), is an agreement with Daug-Hoppecke Gesellschaft Fur Batteriesysteme mbH ("DAHO") of Brilon, Germany. The Company recorded an impairment loss write-off as of June 30, 1994, assigning zero value to the FNC license agreement. For further discussion, see attached referenced portions of the Registrant's Annual Report to Shareholders. EMPLOYEES As of June 30, 1995, approximately 821 persons were employed by the Regis- trant. RESEARCH AND DEVELOPMENT Approximately 6% of the Registrant's employees are engaged in engineering design and product development. Most new products are designed to satisfy specific customer requirements, and the cost of such development is expensed as incurred. Since satisfaction of many customers' needs requires advancing applicable technology, applied research is an integral part of engineering- design and product-development activities. The cost of such activities during the fiscal years ended June 30, 1995, 1994 and 1993, was $4,791,000, $5,666,000 and $5,757,000, respectively. ENVIRONMENTAL MATTERS The Company was informed by the New York State Department of Environmental Conservation (DEC) on December 5, 1994, that the Municipal Waste Landfill, Cuba, NY, has been listed in the New York State Registry of Inactive Hazardous Waste Disposal Sites as a Class "2" site requiring remediation. Acme Electric Corporation has been determined by the DEC to be a potentially responsible party (PRP) by virtue of its disposal of wastes at the site. As a PRP, the Company may be subject to liability for the cost of site investigation and remediation. At this time, there is insufficient information available from which any reasonable estimate of such cost can be made. The Company did have insurance policies in effect during the period that waste was disposed of at the site, which the Company believes would provide coverage in the event the Company is liable. ITEM 2 - PROPERTIES The Registrant owns one plant located in Lumberton, North Carolina. The Registrant concluded the sale of its Cuba, New York, facility in September 1993 -3- and the sale of its Salt Lake City, Utah, facility in February 1994. The Registrant, under an operating lease agreement, leases back portions of the Cuba, New York, facility. The Registrant has completed the construction of a new 91,000-square-foot facility in Cuba, New York, and moved into it during fiscal 1995. The Registrant also maintains operating leases for its Corporate facility in East Aurora, New York, and its plant located in Tempe, Arizona. The Registrant also owns an idle facility in West Jordan, Utah, vacated in conjunction with the restructuring of its Utah activities into the Tempe, Arizona, location. The Registrant believes that these facilities provide adequate capacity for its current operations. SQUARE FOOTAGE SQUARE FOOTAGE LEASE EX- LOCATION OWNED LEASED PIRATION DATE Cuba, NY (New Plant) - 91,000 April 2017 Cuba, NY (Old Plant) - 68,757 August 1996 East Aurora, NY - 10,000 April 1999 (Exec. Offices) Lumberton, NC 128,170 - N/A Tempe, AZ - 40,260 March 2000 West Jordan, UT 23,242 - N/A ITEM 3 - LEGAL PROCEEDINGS The Registrant is involved in ordinary routine litigation incidental to its business, but none is expected to have a material impact upon the financial condition of the Registrant. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders through the solicitation of proxies or otherwise. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Information relating to the market and market prices of the Registrant's common stock, the approximate number of Registrant's shareholders and its dividend history for the past two fiscal years appears on page 32 of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an exhibit and such information is incorporated by reference herein. Information relating to long-term debt for the past two fiscal years appears on page 27 of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an exhibit and such information is incorporated by reference. The Registrant suspended its quarterly cash dividend effective the third quarter of fiscal 1991. The loss in fiscal 1991 resulted in a deficit of retained earnings. The Registrant, therefore, does not expect to reinstate dividends in the foreseeable future. -4- ITEM 6 - SELECTED FINANCIAL DATA A five-year summary of certain financial information relating to the financial condition and results of operations of the Registrant appears on page 21 of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an exhibit and such summary is incorporated by reference herein. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations appears on pages 18 and 20 of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an exhibit and such management's discussion and anaylsis is incorporated by reference herein. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of the Registrant and its subsidiaries, appearing on pages 22 through 31 of the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995, submitted herewith as an exhibit, are incorporated by reference herein: Consolidated Statements of Operations - Years Ended June 30, 1995, 1994, 1993 Consolidated Balance Sheets - June 30, 1995 and 1994 Consolidated Statements of Cash Flows - Years Ended June 30, 1995, 1994, 1993 Consolidated Statements of Shareholders' Equity - Years Ended June 30, 1995, 1994, 1993 Notes to Consolidated Financial Statements ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES There have been no disagreements with accountants on accounting and financial disclosure matters. PART III ITEM 10 - DIRECTORS AND OFFICERS OF THE REGISTRANT IDENTIFICATION OF DIRECTORS Information on directors of the Registrant is contained under the caption "Election of Directors," presented in the Registrant's Definitive Proxy Statement filed pursuant to Regulation 14A and used in conjunction with the Registrant's 1995 Annual Meeting of Shareholders to be held on October 27, 1995, and is incorporated by reference herein. -5- IDENTIFICATION OF EXECUTIVE OFFICERS SUMMARY OF BUSINESS EXPERIENCE NAME, AGE AND POSITION OVER THE LAST FIVE YEARS Robert J. McKenna, 47, Chairman, Prior to assuming the position currently President and Chief Executive Officer held in October 1994, served as President and Chief Executive Officer since October 1993. Prior thereto, served as President and Chief Operating officer since September 1992. Prior thereto, served as Group Vice President of the Diversified Products Group, Aeroquip Corporation since April 1990. Prior thereto, Vice President and General Manager of the Automotive Connectors Division of Aeroquip Corporation since July 1989. Daniel K. Corwin, 48, Prior to assuming the position currently Senior Vice President held in August 1994, served as Vice and Chief Financial Officer President of Administration and Chief Financial Officer since February 1992. Prior thereto, served as Vice President and General Manager, Electronics Division, since November 1990. Prior thereto, served as Vice President of Operations since July 1988. David G. Anderson, 43, Prior to assuming the position currently Corporate Secretary, Treasurer, held in February 1992, served as and General Counsel Corporate Secretary, Treasurer, Controller and General Counsel since April 1988. Donald J. Chesner, 51, Prior to assuming the position currently Vice President and General held in May 1993, served as General Manager, Acme Transformer Division Manager since February 1992. Prior thereto, served as National Sales Manager, Acme Transformer Division, since March 1987. John E. Gleason, 48, Prior to assuming the position currently Vice President and General held in May 1993, served as General Manager, Electronics Division Manager since February 1992. Prior thereto, served as Operations Manager, Cuba Electronics Division, since October 1991, and prior thereto, served as Operations Manager, Salt Lake City Electronics Division, since January 1987. Menahem Anderman, 42, Prior to assuming the position currently Vice President and General held in April 1994, served as Venture Manager, Advanced Energy Systems Director since May 1993. Prior thereto, served as Technical Director since May 1988. ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS Information called for in response to this item is contained under the captions "Compensation of Executive Officers," "Employment Agreement," "1981 -6- Incentive Stock Option Plan," "1989 Stock Option Plan," and "Pension Plan," presented in the Registrant's definitive proxy statement filed pursuant to Regulation 14A and used in conjunction with the Registrant's 1995 Annual Meeting of Shareholders to be held on October 27, 1995, and is incorporated by reference herein. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relating to security ownership of certain beneficial owners and management is contained under the captions "Voting Securities and Principal Holders Thereof" and "Nominees For Election As Directors" in the Registrant's definitive proxy statement filed pursuant to Regulation 14A and used in conjunction with the Registrant's 1995 Annual Meeting of Shareholders to be held on October 27, 1995, and is incorporated by reference herein. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain transactions have been referenced under Item 11. There are no other applicable relationships or related transactions. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS See the accompanying Index to Financial Statements and Financial Statement Schedules on page F-1 of this report. 2. FINANCIAL STATEMENT SCHEDULES See the accompanying Index to Financial Statements and Financial Statement Schedules on page F-1 of this report. 3. EXHIBITS PAGE NUMBER OR INCORPORATION -------- BY REFERENCE ---------------------------- 3a Certificate of Incorporation, Exhibit (3a) to Report on as amended to date Form 10-K for fiscal year ended June 30, 1989. 3b Bylaws, as amended to date Exhibit (3b) to Report on Form 10-K for fiscal year ended June 30, 1990. 10 Employment Agreements See Exhibit 10 attached. 11 Statement re. computation of Note (1e) to Consolidated per share earnings Financial Statements at page 26 of 1995 Annual Report to Shareholders. 13 Acme Electric Corporation 1995 Annual Report to Shareholders See Exhibit 13 attached. 21 Subsidiaries of Registrant See Exhibit 21 attached. -7- 22 1995 Proxy Statement Definitive Proxy Statement filed under Schedule 14A, September 18, 1995, File No. 001-08277. 23 a,b, Additional Exhibits - Pages F-4 through F-7 on c,d Undertakings Report on Form 10-K for fiscal year ended June 30, 1995. 99 Additional Exhibits - News Release, April 28 1995, announcing third quarter results. See Exhibit 99-1 attached. News Release, May 17, 1995, announcing Robert D. Batting being named to the board of directors. See Exhibit 99-2 attached. News Release, May 17, 1995, announcing Randall L. Clark being named to the board of directors. See Exhibit 99-3 attached. News Release, May 26, 1995, announcing response to recent stock activity. See Exhibit 99-4 attached. News Release, June 13, 1995, announcing response to recent stock activity. See Exhibit 99-5 attached. News Release, June 27, 1995, announcing response to recent stock activity. See Exhibit 99-6 attached. News Release, July 12, 1995, announcing an agreement with B.A.T. International. See Exhibit 99-7 attached. News Release, July 20, 1995, announcing response to news report about the Company. See Exhibit 99-8 attached. News Release, August 14, 1995, announcing fourth quarter and year-end results. See Exhibit 99-9 attached. (b) REPORTS ON FORM 8-K There were no reports filed on Form 8-K during the fifty-two-week period ending June 30, 1995. -8- SIGNATURES 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. SIGNATURE AND TITLE DATE /s/ 09/28/95 Robert D. Batting, Director /s/ 09/28/95 Robert T. Brady, Director /s/ 09/28/95 Randall L. Clark, Director ____________________________________ 09/28/95 W. Bennett Conner, Director /s/ 09/28/95 G. Wayne Hawk, Director /s/ 09/28/95 Terry M. Manon, Director /s/ 09/28/95 Robert J. McKenna, Director /s/ 09/28/95 James W. McLaughlin, Director -9- 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. ACME ELECTRIC CORPORATION By: /s/ Date: 09/28/95 Robert J. McKenna Chairman, President and Chief Executive Officer By: /s/ Date: 09/28/95 Daniel K. Corwin Senior Vice President and Chief Financial Officer -10- ACME ELECTRIC CORPORATION INDEX TO FINANCIAL STATEMENTS The financial statements together with the report thereon of Price Waterhouse LLP dated August 10, 1995, appearing on pages 22 through 31 of the accompanying 1995 Annual Report to Shareholders, are incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in Items 5, 6, 7, 8 and 14 of this Form 10-K, the 1995 Annual Report to Shareholders is not to be deemed filed as part of this report. The following financial statement schedules should be read in conjunction with the financial statements in such 1995 Annual Report to Shareholders. Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. FINANCIAL STATEMENT SCHEDULES 1995 1994 AND 1993 PAGE Report of independent accountants F-2 Valuation and qualifying accounts and F-3 reserves (Schedule VIII) Consents of independent accountants F-4, F-5 F-6 and F-7 F-1 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Acme Electric Corporation Our audits of the consolidated financial statements referred to in our report dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to Shareholders of Acme Electric Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in the Index to Financial Statements and Financial Statement Schedules which appears on page F-1 of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PRICE WATERHOUSE LLP Buffalo, New York August 10, 1995 F-2
ACME ELECTRIC CORPORATION SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (000's Omitted) ADDITIONS ADDITIONS BALANCE AT (DEDUCTIONS) (DEDUCTIONS) DEDUCTIONS BALANCE BEGINNING COST AND OTHER FROM AT END OF YEAR EXPENSE ACCOUNTS RESERVES OF YEAR ---------- ---------- ---------- ---------- ------- FISCAL YEAR ENDED JUNE 30, 1995 Reserve deducted from assets: Allowance for doubtful accounts $ 169 $ 331 $ - $ 49 $ 451 Inventory obsolescence and impairment reserve $ 709 $ - $ - $143 $ 566 Valuation allowance provided on deferred tax asset (SFAS 109) $ - $ - $ - $ - $ - Restructuring Cost Reserves $1,292 $ - $ - $893 $ 399 FISCAL YEAR ENDED JUNE 30, 1994 Reserve deducted from assets: Allowance for doubtful accounts $207 $ 301 $ - $339 $ 169 Inventory obsolescence and impairment reserve $359 $ 350 $ - $ - $ 709 Valuation allowance provided on deferred tax asset (SFAS 109) $147 $ - $ - $147 $ - Restructuring Cost Reserves $ - $1,515 $ - $223 $1,292 FISCAL YEAR ENDED JUNE 30, 1993 Reserve deducted from assets: Allowance for doubtful accounts $ 80 $ 143 $ - $ 16 $ 207 Inventory obsolescence and impairment reserve $252 $ 107 $ - $ - $ 359 Valuation allowance provided on deferred tax asset (SFAS 109) $ - $ 173 $ - $ 26 $ 147
F-3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 2-45985) of Acme Electric Corporation of our report dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-2 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Buffalo, New York September 28, 1995 F-4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 2-92825) of Acme Electric Corporation of our report dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-2 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Buffalo, New York September 28, 1995 F-5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 2-89587) of Acme Electric Corporation of our report dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-2 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Buffalo, New York September 28, 1995 F-6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-79488) of Acme Electric Corporation of our report dated August 10, 1995 appearing on page 31 of the 1995 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-2 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Buffalo, New York September 28, 1995 F-7 EX-10 2 EMPLOYEE AGREEMENTS EXHIBIT 10 EMPLOYMENT AGREEMENTS August 12, 1992 Mr. Robert J. McKenna 4763 Sunwood Drive Toledo, Ohio 43623 Dear Bob: I want to encourage you to accept our offer to the position of President and Chief Operating Officer of Acme Electric Corporation. In addition to our offer letter of August 11, 1992 I wish to give you assurance that it is my intent and the intent of the Board of Directors to groom you as my eventual replacement as Chief Executive Officer. Since you have expressed some concern with respect to timing I wish to extend to you the guarantee that in the event you are terminated without just cause from the Corporation you will paid full salary for a period of six months. Furthermore in the event you are not promoted to the position of Chief Executive Officer within a period of three years you will be extended the option of resigning with six months salary being paid to you by the Corporation beginning with the date of your resignation letter. Bob I hope that our offer meets your requirements and look forward to working with you. Sincerely, /s/ G. Wayne Hawk EMPLOYMENT AGREEMENT AGREEMENT made as of the 30th day of June 1995 by and between Acme Electric Corporation, a New York corporation, having an office at 400 Quaker Road, East Aurora, New York, (the "Company") and Mr. Daniel K. Corwin, residing at 105 Curley Drive, Orchard Park, New York, ("Mr. Corwin"). W I T N E S S E T H: WHEREAS, Mr. Corwin is Senior Vice President and Chief Financial Officer ("CFO") of the Company; and WHEREAS, the Company believes that it is in its best interest to assure the continued services of Mr. Corwin as its Senior Vice President and CFO on the terms and conditions hereinafter set forth; and WHEREAS, Mr. Corwin is desirous of receiving assurances that should a "change in control" hereinafter defined take place at the Company, he will be provided with security as to his position, compensation and benefits. NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties hereto agree as follows: 1. The Company hereby employs Mr. Corwin and Mr. Corwin hereby accepts employment with the Company as its Senior Vice President and CFO upon the terms and conditions herein contained. 2A. The initial Term shall be for a period commencing on the date hereof and terminating two years from the date of commencement or two years from its most recent extension date, whichever is later. At the end of each month during the Term, the Term shall be automatically continued and extended for one additional month, unless on or before fifteen days prior to the end of any month during the Term, the Company shall give to Mr. Corwin or Mr. Corwin shall give to the Company a notice of intent not to extend. Then, in such event, the Term as theretofore automatically extended shall be deemed further extended for one additional month, and thereafter there shall be no further automatic extensions. (As an example, should the Company or Mr. Corwin give to the other party a written notice of intent not to extend on November 15, 1995, the Agreement would be deemed extended to, and would expire on, December 31, 1997.) "Term" as used in this Agreement shall be deemed to mean the period of employment from the date hereof through June 30, 1997, or as automatically extended pursuant to this Paragraph 2A. 2B. Should the Company breach this Agreement pursuant to the provisions of Paragraphs 8A, 8B, 8C or 9 herein, Mr.Corwin shall be entitled to the following: a. Payments in an amount equal to the base salary payable over the then remaining Term of the Agreement, with such base salary to be in an amount equal to Mr. Corwin's salary in effect prior to such breach, plus bonus. The bonus amount will be equal to the average of Mr. Corwin's greatest two out of the previous three years' bonuses, or 20% of base salary, whichever is greater. b. Full medical insurance benefits and life insurance benefits comparable to those enjoyed prior to such breach, which shall extend for the duration of Mr. Corwin's life or until he accepts other full-time employment. c. Payments made pursuant to this paragraph 2B shall be made monthly from the date the Company breached this Agreement throughout the then remaining Term of the Agreement, or at Mr. Corwin's option in a lump sum, within thirty (30) days of notification of such breach. Such lump sum shall be an amount equal to the discounted present value of the payments which were to be paid over the Term specified herein discounted at a rate of 10% per annum. 2C. "Change in control" as used in this Agreement shall mean any one of the following: a. An acquisition of 35% or more of the Company's stock, or merger or consolidation by or with another entity or group; b. A tender offer or tender offers for the Company's stock, in which 35% or more of the outstanding stock of the Company is tendered or purchased by a single entity or affiliated group; c. A reclassification of securities or recapitalization of the Company which directly or indirectly, disproportionately increases or decreases the outstanding shares of any class of equity securities of the Company by 35% or more; d. A sale, lease, exchange, mortgage, pledge, transfer or other disposition of substantially all the assets of the Company approved by the Board of Directors; e. A change in control shall be deemed to have occurred if at any time less than 51% of the members of the Board of Directors shall be persons who were either nominated for election by the Board of Directors or were elected by the Board of Directors. 3. Except as otherwise provided herein during the Term of the Agreement, the Company shall employ Mr. Corwin as its Senior Vice President and CFO and he shall serve the Company in such capacity, performing the normal duties of a Senior Vice President and CFO of a corporation in the Company's business, subject at all times to the direction and control of the Board of Directors of the Company, shall devote his time, attention, skill and energy to the business, welfare and affairs of the Company, and shall use his best efforts to promote the interests of the Company, it being understood that the conduct of such duties does not require his attendance at the offices of the Company during any particular fixed periods. Mr. Corwin hereby consents to continue to serve as a Director of any subsidiary of the Company without additional compensation. 4A. The Company shall pay and Mr. Corwin shall accept as compensation for all services to be rendered hereunder and during the Term, a base salary determined by the Board of Directors of the Company pursuant to its normal procedure for setting yearly salaries for officers of the Company (currently, $135,000 per annum). Such payments hereunder shall be payable in accordance with the prevailing salary payroll practices of the Company and subject to such deductions as are agreed to by Mr. Corwin. Nothing contained in this Agreement shall be deemed to prevent the Company during the Term hereof from giving bonuses or other additional consideration to Mr. Corwin from time to time as determined by the Board of Directors or, except as otherwise specifically provided herein, prevent Mr. Corwin from receiving benefits in accordance with any benefit plan or program made available by the Company to its officers or salaried employees. 4B. The Company shall reimburse Mr. Corwin for all expenses reasonably incurred by him in connection with his performance of services to the Company, including entertainment and travel. Mr. Corwin shall be entitled to receive or participate in all other fringe benefits, such as medical and hospital plans, profit-sharing plans and pension plans, stock options under the then existing corporate stock option plan (currently 5,000 shares following each year of profitable operation), and use and maintenance of an automobile, which the Company may generally make available to its executive employees. 4C. Notwithstanding anything herein to the contrary, the Company shall not be obligated to pay any portion of any amount otherwise payable to Mr. Corwin pursuant to this Agreement if the Company could not reasonably deduct such portion in accordance with the Internal Revenue Code then in effect. 5A. Mr. Corwin acknowledges that during the course of his employment hereunder, he will acquire, possess and become exposed to confidential and proprietary information and materials of the Company. Accordingly, during his employment hereunder and for a period of two (2) years thereafter, he shall not, for any reason whatever, except in the regular authorized course of the Company's business under appropriate secrecy provisions, directly or indirectly, use or exploit or disclose or divulge to anyone (who is not authorized to receive the same), without the prior written permission of the Company, any proprietary information, including, but not limited to, trade secrets, know-how, data, materials or other knowledge relating to or pertaining to the business of the Company, unless the same (i) has been published and/or has become a part of the public domain other than by Acts of Omission by Mr. Corwin; (ii) has been lawfully furnished or made known to Mr. Corwin by a third party without restriction on disclosure or use; and (iii) was in Mr. Corwin's possession at the time he first became associated with the Company and was not acquired by Mr. Corwin either directly or indirectly from the Company. 5B. All documents, records, prototypes or other tangible embodiments or evidence of the discoveries, trade secrets, information, know-how, data, materials or other knowledge previously referred to, which may at any time be acquired by or come into the possession of Mr. Corwin during his employment hereunder (except materials excluded in Subparagraph A hereof), are the sole and exclusive property of the Company and must be surrendered to the Company, without demand therefor, upon termination of Mr. Corwin's employment hereunder, or upon the request by the Company at any other time; and, in addition, prior to such termination of employment or upon the reasonable request by the Company at any other time, Mr. Corwin will prepare materials to accurately and adequately describe, set forth or embody any of the foregoing and deliver the same to the Company in order to accomplish or complete the transfer of any and all of the foregoing to the Company and shall be reimbursed by the Company for all of his reasonable out-of-pocket expenses in connection therewith. 5C. Mr. Corwin agrees to execute all documents and to take all such other action as the Company may reasonably require (being reimbursed for all of his reasonable out-of-pocket expenses in this connection) in order to assign to the Company any and all rights to any materials prepared by him during and in connection with his employment hereunder. 6A. Mr. Corwin agrees that, during his employment hereunder for a period of two (2) years after termination of his employment hereunder for whatever reason (except in the event such termination is caused by (a) a material breach of this Agreement by the Company, or (b) the Company's bankruptcy (as defined in Paragraph 14 hereof), he shall not (without the prior written consent of the Company) (i) solicit as a client or customer in competition with the Company any persons or entities which were, during his employment hereunder, clients or customers of the Company, (ii) enter into any business arrangements with any of the foregoing which could be reasonably deemed to be materially competitive with or materially injurious to any business in which the Company is engaged at the time of such termination, or (iii) solicit, or be instrumental in any way in causing, any other person to leave the employ of the Company. Mr. Corwin further agrees that he shall not (without the prior written consent of the Company) for a period of two (2) years after the termination of his employment hereunder for any reason, directly or indirectly, individually or as a director, partner, employee, officer or agent, engage in any employment, performance of services or other activity on behalf of any company if such employment, performance of services or other activity can be reasonably deemed to be materially competitive with or materially injurious to any business in which the Company is engaged at the time of such termination. 6B. For purposes only of determining whether services by Mr. Corwin during the aforesaid two-year (2-year) period after his termination of employment hereunder shall be "materially competitive with or materially injurious to the Company" within the meaning of this paragraph, either party may initiate arbitration proceedings to make such determination pursuant to Paragraph 13 hereof. 6C. If Mr. Corwin commits a material breach of any of the provisions of Paragraph 5A, 5B, 5C, or 6A, the Company shall have the right and remedy to have such provisions specifically enforced by any court having equity jurisdiction, since any such breach or threatened breach will cause irreparable injury to the Company and money damages will not provide an adequate remedy to the Company. 7. During the Term, Mr. Corwin will not directly or indirectly engage in the business of, or own or control any interest in (except as a passive investor owning less than ten percent (10%) of the equity securities of a publicly owned company) or act as director, officer or employee of, or consultant to, any individual, partnership, joint venture, corporation or other business entity directly or indirectly engaged anywhere in the United States in any business competing with the business carried on by the Company or any of its subsidiaries. 8A. It is specifically understood and agreed that the Company may terminate this Agreement and its obligations to Mr. Corwin hereunder prior to a change in control or upon voluntary retirement by Mr. Corwin from active employment with the Company. Notwithstanding the foregoing, any breach of this Agreement by the Company or any notice of termination which is ultimately determined to have been a breach of this Agreement, within one year of a change in control, shall be deemed notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. Corwin's employment with the Company. 8B. At any time during the Term of this Agreement, after a change in control has taken place, should the Company reduce the compensation or benefits then being paid to Mr. Corwin, it shall be deemed a breach of this Agreement and a notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. Corwin's employment with the Company. 8C. At any time during the Term of this Agreement, after a change in control has taken place, should the Company change Mr. Corwin's position or duties without his written consent, it shall be deemed a breach of this Agreement and a notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. Corwin's employment with the Company. 9. In the event that during Mr. Corwin's lifetime and during the Term of this Agreement, after a change in control has taken place, the Company defaults as to any payment under this Agreement or fails to make any payments provided for in this Agreement and fails to cure such default or make such payment within ten (10) days after written notice thereof, or written demand therefor, or in the event that the Company terminates this Agreement for cause and it is ultimately determined that such termination was wrongful, Mr. Corwin may elect to treat such default or wrongful termination as a breach of this Agreement and shall be entitled to recover all of his expenses, including reasonable attorneys fees in prosecuting or defending any actions or proceedings arising out of, or in any other way relating to, the matters referred to in this paragraph, and the provisions of Paragraph 2B of this Agreement shall apply. 10. Any controversy, claim or dispute arising out of or relating to this Agreement, including without limitation, any claim for breach of this Agreement, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association (AAA) obtaining at the time of such proceeding, except that the authority of the arbitrators shall be limited to the interpretation and enforcement of the terms and conditions of this Agreement and the arbitrators shall set forth in writing the reasons for their decisions. Judgement upon any award rendered by the arbitrators pursuant hereto may be entered in any court having jurisdiction thereof and thereafter enforced. Either party shall have the right to initiate arbitration proceedings. Any arbitration shall take place at the office of the AAA with the closest geographical proximity to the Company's executive offices. There shall be three arbitrators. Each party shall appoint one arbitrator. If either party fails to appoint an arbitrator within five (5) days from the date upon which the notice of the initiating party of its intention to arbitrate is received by the other party to such proceeding, the AAA shall make the appointment for said party. The two arbitrators appointed in the manner provided for above shall appoint a third arbitrator, mutually acceptable to them. If the two arbitrators first appointed cannot, for any reason, agree upon a third arbitrator, or an acceptable person is unable to act, the AAA shall appoint the third arbitrator in accordance with its rules. 11. Mr. Corwin may terminate this Agreement prior to the date of expiration of the Term hereinabove set forth by written notice to the Company if the Company shall file a petition in bankruptcy, make a voluntary assignment for the benefit of creditors, file a petition or an answer seeking an arrangement with creditors or take advantage of any insolvency law, or if the Company applies for or consents to the appointment of a receiver or trustee of all or a substantial part of its assets, or an order, judgement or decree shall be entered in any court of competent jurisdiction appointing a receiver of all or a substantial part of its assets, and such order, judgement or decree shall continue unstayed and in effect for any consecutive period of ninety (90) days. 12. This Agreement and all rights hereunder are personal to Mr. Corwin and shall not be assignable; provided, however, that all of Mr. Corwin's rights under the Agreement shall inure the benefit of his heirs, distributees, personal representatives or designees or other legal representatives, as the case may be. Any person, firm or corporation succeeding to the business of the Company by merger, purchase, consolidation or otherwise, shall assume by contract or operations of law the obligations of the Company hereunder; provided, however, that the Company shall, notwithstanding such assumption or assignment, remain liable and responsible for fulfilling the obligations of the Company under this Agreement. This Agreement supersedes and replaces any and all present written or oral agreements of employment between the parties hereto, and all such agreements are hereby deemed cancelled, revoked and of no further for or effect. 13. Without in any way implying that any provisions hereof is invalid or unenforceable, the invalidity or unenforceability of any provision hereof shall in not way affect the validity or enforceability of any other provision. 14. This Agreement constitutes the whole agreement between the parties hereto, and there are no terms other than those stated herein. No variation hereof shall be deemed valid unless in writing and signed by the parties hereto, and no discharge of the terms hereof shall be deemed valid unless by full performance by the parties hereto or by a writing signed by the parties hereto. No waiver by either party of any provisions or condition of this Agreement to be performed by them should be deemed a waiver of any other provisions of this Agreement. 15. Any notice, statement, report, request or demand required or permitted to be given by this Agreement shall be in writing, and shall be sufficient if addressed and sent by certified mail, return receipt requested, to the parties at the addresses set forth above, or at such other place that either party may designate by notice to the other and shall be deemed given when so mailed. 16. This Agreement has been made in, and shall be interpreted according to the laws of, the state of New York. The parties hereto submit to the jurisdic- tion of the courts of the state of New York for the purpose of any actions or proceedings which may be required to enforce the provisions of this Agreement or an award made in any arbitration proceeding initiated hereunder. IN WITNESS WHEREOF, the parties have hereunto set their respective hands and seals causing these presents to be executed as of the day and year first above written. Witnessed: /s/ /s/ Daniel K. Corwin Witnessed: ACME ELECTRIC CORPORATION /s/ By: /s/ David G. Anderson Scretary and Treasurer EMPLOYMENT AGREEMENT AGREEMENT made as of the 30th day of June 1995 by and between Acme Electric Corporation, a New York corporation, having an office at 400 Quaker Road, East Aurora, New York, (the "Company") and Mr. Robert J. McKenna, residing at 5 Hummingbird Court, Orchard Park, New York, ("Mr. McKenna"). W I T N E S S E T H: WHEREAS, Mr. McKenna is Chief Executive Officer ("CEO"), Chairman and President of the Company; and WHEREAS, the Company believes that it is in its best interest to assure the continued services of Mr. McKenna as its CEO, Chairman and President on the terms and conditions hereinafter set forth; and WHEREAS, Mr. McKenna is desirous of receiving assurances that should a "change in control" hereinafter defined take place at the Company, he will be provided with security as to his position, compensation and benefits. NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties hereto agree as follows: 1. The Company hereby employs Mr. McKenna and Mr. McKenna hereby accepts employment with the Company as its CEO, Chairman and President upon the terms and conditions herein contained. 2A. The initial Term shall be for a period commencing on the date hereof and terminating three years from the date of commencement or three years from its most recent extension date, whichever is later. At the end of each month during the Term, the Term shall be automatically continued and extended for one additional month, unless on or before fifteen days prior to the end of any month during the Term, the Company shall give to Mr. McKenna or Mr. McKenna shall give to the Company a notice of intent not to extend. Then, in such event, the Term as theretofore automatically extended shall be deemed further extended for one additional month, and thereafter there shall be no further automatic extensions. (As an example, should the Company or Mr. McKenna give to the other party a written notice of intent not to extend on November 15, 1995, the Agreement would be deemed extended to, and would expire on, December 31, 1998.) "Term" as used in this Agreement shall be deemed to mean the period of employment from the date hereof through June 30, 1998, or as automatically extended pursuant to this Paragraph 2A. 2B. Should the Company breach this Agreement pursuant to the provisions of Paragraphs 8A, 8B, 8C or 9 herein, Mr.McKenna shall be entitled to the following: a. Payments in an amount equal to the base salary payable over the then remaining Term of the Agreement, with such base salary to be in an amount equal to Mr. McKenna's salary in effect prior to such breach, plus bonus. The bonus amount will be equal to the average of Mr. McKenna's greatest two out of the previous three years' bonuses, or 30% of base salary, whichever is greater. b. Full medical insurance benefits and life insurance benefits comparable to those enjoyed prior to such breach, which shall extend for the duration of Mr. McKenna's life or until he accepts other full-time employment. c. Payments made pursuant to this paragraph 2B shall be made monthly from the date the Company breached this Agreement throughout the then remaining Term of the Agreement, or at Mr. McKenna's option in a lump sum, within thirty (30) days of notification of such breach. Such lump sum shall be an amount equal to the discounted present value of the payments which were to be paid over the Term specified herein discounted at a rate of 10% per annum. 2C. "Change in control" as used in this Agreement shall mean any one of the following: a. An acquisition of 35% or more of the Company's stock, or merger or consolidation by or with another entity or group; b. A tender offer or tender offers for the Company's stock, in which 35% or more of the outstanding stock of the Company is tendered or purchased by a single entity or affiliated group; c. A reclassification of securities or recapitalization of the Company which directly or indirectly, disproportionately increases or decreases the outstanding shares of any class of equity securities of the Company by 35% or more; d. A sale, lease, exchange, mortgage, pledge, transfer or other disposition of substantially all the assets of the Company approved by the Board of Directors to which Mr. McKenna dissented; e. A change in control shall be deemed to have occurred if at any time less than 51% of the members of the Board of Directors shall be persons who were either nominated for election by the Board of Directors or were elected by the Board of Directors. 3. Except as otherwise herein provided during the Term of the Agreement, the Company shall employ Mr. McKenna as its CEO, Chairman and President and he shall serve the Company in such capacity, performing the normal duties of a CEO, Chairman and President of a corporation in the Company's business, subject at all times to the direction and control of the Board of Directors of the Company, shall devote his time, attention, skill and energy to the business, welfare and affairs of the Company, and shall use his best efforts to promote the interests of the Company, it being understood that the conduct of such duties does not require his attendance at the offices of the Company during any particular fixed periods. Mr. McKenna hereby consents to continue to serve as a Director of the Company or any subsidiary thereof without additional compensation. 4A. The Company shall pay and Mr. McKenna shall accept as compensation for all services to be rendered hereunder and during the Term, a base salary determined by the Board of Directors of the Company pursuant to its normal procedure for setting yearly salaries for officers of the Company (currently, $215,000 per annum). Such payments hereunder shall be payable in accordance with the prevailing salary payroll practices of the Company and subject to such deductions as are agreed to by Mr. McKenna. Nothing contained in this Agreement shall be deemed to prevent the Company during the Term hereof from giving bonuses or other additional consideration to Mr. McKenna from time to time as determined by the Board of Directors or, except as otherwise specifically provided herein, prevent Mr. McKenna from receiving benefits in accordance with any benefit plan or program made available by the Company to its officers, salaried employees or directors. 4B. The Company shall reimburse Mr. McKenna for all expenses reasonably incurred by him in connection with his performance of services to the Company, including entertainment and travel. Mr. McKenna shall be entitled to receive or participate in all other fringe benefits, such as medical and hospital plans, profit-sharing plans and pension plans, stock options under the then existing corporate stock option plan (currently 10,000 shares following each year of profitable operation), and use and maintenance of an automobile, which the Company may generally make available to its executive employees. 4C. Notwithstanding anything herein to the contrary, the Company shall not be obligated to pay any portion of any amount otherwise payable to Mr. McKenna pursuant to this Agreement if the Company could not reasonably deduct such portion in accordance with the Internal Revenue Code then in effect. 5A. Mr. McKenna acknowledges that during the course of his employment hereunder, he will acquire, possess and become exposed to confidential and proprietary information and materials of the Company. Accordingly, during his employment hereunder and for a period of two (2) years thereafter, he shall not, for any reason whatever, except in the regular authorized course of the Company's business under appropriate secrecy provisions, directly or indirectly, use or exploit or disclose or divulge to anyone (who is not authorized to receive the same), without the prior written permission of the Company, any proprietary information, including, but not limited to, trade secrets, know-how, data, materials or other knowledge relating to or pertaining to the business of the Company, unless the same (i) has been published and/or has become a part of the public domain other than by Acts of Omission by Mr. McKenna; (ii) has been lawfully furnished or made known to Mr. McKenna by a third party without restriction on disclosure or use; and (iii) was in Mr. McKenna's possession at the time he first became associated with the Company and was not acquired by Mr. McKenna either directly or indirectly from the Company. 5B. All documents, records, prototypes or other tangible embodiments or evidence of the discoveries, trade secrets, information, know-how, data, materials or other knowledge previously referred to, which may at any time be acquired by or come into the possession of Mr. McKenna during his employment hereunder (except materials excluded in Subparagraph A hereof), are the sole and exclusive property of the Company and must be surrendered to the Company, without demand therefor, upon termination of Mr. McKenna's employment hereunder, or upon the request by the Company at any other time; and, in addition, prior to such termination of employment or upon the reasonable request by the Company at any other time, Mr. McKenna will prepare materials to accurately and adequately describe, set forth or embody any of the foregoing and deliver the same to the Company in order to accomplish or complete the transfer of any and all of the foregoing to the Company and shall be reimbursed by the Company for all of his reasonable out-of-pocket expenses in connection therewith. 5C. Mr. McKenna agrees to execute all documents and to take all such other action as the Company may reasonably require (being reimbursed for all of his reasonable out-of-pocket expenses in this connection) in order to assign to the Company any and all rights to any materials prepared by him during and in connection with his employment hereunder. 6A. Mr. McKenna agrees that, during his employment hereunder for a period of two (2) years after termination of his employment hereunder for whatever reason (except in the event such termination is caused by (a) a material breach of this Agreement by the Company, or (b) the Company's bankruptcy (as defined in Paragraph 14 hereof), he shall not (without the prior written consent of the Company) (i) solicit as a client or customer in competition with the Company any persons or entities which were, during his employment hereunder, clients or customers of the Company, (ii) enter into any business arrangements with any of the foregoing which could be reasonably deemed to be materially competitive with or materially injurious to any business in which the Company is engaged at the time of such termination, or (iii) solicit, or be instrumental in any way in causing, any other person to leave the employ of the Company. Mr. McKenna further agrees that he shall not (without the prior written consent of the Company) for a period of two (2) years after the termination of his employment hereunder for any reason, directly or indirectly, individually or as a director, partner, employee, officer or agent, engage in any employment, performance of services or other activity on behalf of any company if such employment, performance of services or other activity can be reasonably deemed to be materially competitive with or materially injurious to any business in which the Company is engaged at the time of such termination. 6B. For purposes only of determining whether services by Mr. McKenna during the aforesaid two-year (2-year) period after his termination of employment hereunder shall be "materially competitive with or materially injurious to the Company" within the meaning of this paragraph, either party may initiate arbitration proceedings to make such determination pursuant to Paragraph 13 hereof. 6C. If Mr. McKenna commits a material breach of any of the provisions of Paragraph 5A, 5B, 5C, or 6A, the Company shall have the right and remedy to have such provisions specifically enforced by any court having equity jurisdiction, since any such breach or threatened breach will cause irreparable injury to the Company and money damages will not provide an adequate remedy to the Company. 7. During the Term, Mr. McKenna will not directly or indirectly engage in the business of, or own or control any interest in (except as a passive investor owning less than ten percent (10%) of the equity securities of a publicly owned company) or act as director, officer or employee of, or consultant to, any individual, partnership, joint venture, corporation or other business entity directly or indirectly engaged anywhere in the United States in any business competing with the business carried on by the Company or any of its subsidiaries. 8A. It is specifically understood and agreed that the Company may terminate this Agreement and its obligations to Mr. McKenna hereunder prior to a change in control or upon voluntary retirement by Mr. McKenna from active employment with the Company. Notwithstanding the foregoing, any breach of this Agreement by the Company or any notice of termination which is ultimately determined to have been a breach of this Agreement, within one year of a change in control, shall be deemed notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. McKenna's employment with the Company. 8B. At any time during the Term of this Agreement, after a change in control has taken place, should the Company reduce the compensation or benefits then being paid to Mr. McKenna, it shall be deemed a breach of this Agreement and a notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. McKenna's employment with the Company. 8C. At any time during the Term of this Agreement, after a change in control has taken place, should the Company change Mr. McKenna's position or duties without his written consent, it shall be deemed a breach of this Agreement and a notice of termination, and the provisions of Paragraph 2B above shall apply so as to have the effect of fixing the Term as provided herein and terminating Mr. McKenna's employment with the Company. 9. In the event that during Mr. McKenna's lifetime and during the Term of this Agreement, after a change in control has taken place, the Company defaults as to any payment under this Agreement or fails to make any payments provided for in this Agreement and fails to cure such default or make such payment within ten (10) days after written notice thereof, or written demand therefor, or in the event that the Company terminates this Agreement for cause and it is ultimately determined that such termination was wrongful, Mr. McKenna may elect to treat such default or wrongful termination as a breach of this Agreement and shall be entitled to recover all of his expenses, including reasonable attorneys fees in prosecuting or defending any actions or proceedings arising out of, or in any other way relating to, the matters referred to in this paragraph, and the provisions of Paragraph 2B of this Agreement shall apply. 10. Any controversy, claim or dispute arising out of or relating to this Agreement, including without limitation, any claim for breach of this Agreement, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association (AAA) obtaining at the time of such proceeding, except that the authority of the arbitrators shall be limited to the interpretation and enforcement of the terms and conditions of this Agreement and the arbitrators shall set forth in writing the reasons for their decisions. Judgement upon any award rendered by the arbitrators pursuant hereto may be entered in any court having jurisdiction thereof and thereafter enforced. Either party shall have the right to initiate arbitration proceedings. Any arbitration shall take place at the office of the AAA with the closest geographical proximity to the Company's executive offices. There shall be three arbitrators. Each party shall appoint one arbitrator. If either party fails to appoint an arbitrator within five (5) days from the date upon which the notice of the initiating party of its intention to arbitrate is received by the other party to such proceeding, the AAA shall make the appointment for said party. The two arbitrators appointed in the manner provided for above shall appoint a third arbitrator, mutually acceptable to them. If the two arbitrators first appointed cannot, for any reason, agree upon a third arbitrator, or an acceptable person is unable to act, the AAA shall appoint the third arbitrator in accordance with its rules. 11. Mr. McKenna may terminate this Agreement prior to the date of expiration of the Term hereinabove set forth by written notice to the Company if the Company shall file a petition in bankruptcy, make a voluntary assignment for the benefit of creditors, file a petition or an answer seeking an arrangement with creditors or take advantage of any insolvency law, or if the Company applies for or consents to the appointment of a receiver or trustee of all or a substantial part of its assets, or an order, judgement or decree shall be entered in any court of competent jurisdiction appointing a receiver of all or a substantial part of its assets, and such order, judgement or decree shall continue unstayed and in effect for any consecutive period of ninety (90) days. 12. This Agreement and all rights hereunder are personal to Mr. McKenna and shall not be assignable; provided, however, that all of Mr. McKenna's rights under the Agreement shall inure the benefit of his heirs, distributees, personal representatives or designees or other legal representatives, as the case may be. Any person, firm or corporation succeeding to the business of the Company by merger, purchase, consolidation or otherwise, shall assume by contract or operations of law the obligations of the Company hereunder; provided, however, that the Company shall, notwithstanding such assumption or assignment, remain liable and responsible for fulfilling the obligations of the Company under this Agreement. This Agreement supersedes and replaces any and all present written or oral agreements of employment between the parties hereto, and all such agreements are hereby deemed cancelled, revoked and of no further for or effect. 13. Without in any way implying that any provisions hereof is invalid or unenforceable, the invalidity or unenforceability of any provision hereof shall in not way affect the validity or enforceability of any other provision. 14. This Agreement constitutes the whole agreement between the parties hereto, and there are no terms other than those stated herein. No variation hereof shall be deemed valid unless in writing and signed by the parties hereto, and no discharge of the terms hereof shall be deemed valid unless by full performance by the parties hereto or by a writing signed by the parties hereto. No waiver by either party of any provisions or condition of this Agreement to be performed by them should be deemed a waiver of any other provisions of this Agreement. 15. Any notice, statement, report, request or demand required or permitted to be given by this Agreement shall be in writing, and shall be sufficient if addressed and sent by certified mail, return receipt requested, to the parties at the addresses set forth above, or at such other place that either party may designate by notice to the other and shall be deemed given when so mailed. 16. This Agreement has been made in, and shall be interpreted according to the laws of, the state of New York. The parties hereto submit to the jurisdic- tion of the courts of the state of New York for the purpose of any actions or proceedings which may be required to enforce the provisions of this Agreement or an award made in any arbitration proceeding initiated hereunder. IN WITNESS WHEREOF, the parties have hereunto set their respective hands and seals causing these presents to be executed as of the day and year first above written. Witnessed: /s/ /s/ Robert J. McKenna Witnessed: ACME ELECTRIC CORPORATION /s/ By: /s/ David G. Anderson Secretary & Treasurer EX-21 3 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 SUBSIDIARIES OF REGISTRANT NAME STATE OF INCORPORATION Acme-URDC, Inc. Utah doing business as: Utah Research and Development Company EX-13 4 ANNUAL REPORT PORTIONS EXHIBIT 13 PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED JUNE 30, 1995, INCORPORATED BY REFERENCE. PAGE 18 OF ANNUAL REPORT FINANCIAL CONDITION: The Company has financed its working capital requirements and capital spending, in part, with cash from operating revenues and the balance coming primarily from increased bank borrowings. Total debt, including capital lease obligations, increased approximately $4,800,000 during 1995, primarily attributable to capital expenditures of approximately $4,100,000. The working capital of the Company increased by approximately $4,500,000 during 1995, reflecting increases of approximately $6,900,000 in inventory and $2,000,000 in accounts receivable, which were in part financed with increased accounts payable of $5,100,000, with the remainder coming from operating revenues. The growth in inventory is the result of several factors including: the Company's effort to expand its standard power supply product offering through distribution, support of the UPS program requirements associated with AT&T's market entry, to support a new major OEM customer in the transformer industry, transition effects experienced at the Aerospace Division which impeded production and shipping efforts through June 30, and the disruption associated with the Electronics Division's move into its new plant. Accounts receivable increased in response to the increased sales and shipment activity experienced in the fourth quarter of 1995. DOLLARS IN THOUSANDS
YEARS ENDED JUNE 30 1995 1994 1993 - -------------------------------------------------------------- Working Capital $24,990 $20,465 $24,332 Cash provided from (used in) operations (605) 4,355 868 Current ratio 2.7:1 3.0:1 4.2:1 Sales to working capital 3.6:1 3.7:1 3.1:1 Long-term debt to equity 1.5:1 1.3:1 1.1:1
Capital expenditures and foreign investment combined were approximately $4,300,000 in 1995, compared with capital expenditures and license payments of $7,754,000 and $1,563,000 in 1994 and 1993, respectively. Included in the 1995 capital expenditures is $1,500,000 relating to the Cuba plant construction compared to $4,710,000 in 1994. The Cuba plant construction was completed during 1995 with the facility placed in full service in the fourth quarter of the year. Subsequent to June 30, 1995, the Company entered into an agreement with third party contractors to commence implementation of a new business information system. It is anticipated that the total cost of the system will approximate $3,500,000 over the next eighteen months, and will be financed through a five-year capital lease. Capital expenditures, exclusive of the new business system, are expected to approximate $1,800,000 in 1996. The Company expects that operating activities in 1996 will produce net cash to fund these capital expenditures and any increase in working capital caused by increased sales. At June 30, 1995, the Company had a secured $6,072,000 term loan at the lower of prime plus 1.5%, or 3% above the Eurodollar rate, and a secured line of credit allowing for revolving loans and letters of credit up to $21,000,000 with interest at the lower of prime plus 1.0%, or the London Interbank Eurodollar rate plus 2.5%, with an outstanding balance of $16,988,000. The credit agreement, as extended, provides for a maturity date on the line of credit of December 1, 1996, with an option for a one-year extension, while the term loan matures January 2, 2000. The agreement contains certain restrictive covenants including, but not limited to, maintenance of earnings and interest coverage, and maintenance of minimum working capital and debt-to-worth ratios. In addition, the Company received in July 1995, the $1,500,000 government loan proceeds associated with the recently completed Cuba facility. This loan contains both a three year moratorium on interest and principal and a preferential interest rate upon commencement of repayment. In July 1995, the Company negotiated an increase of $2,000,000 in its revolving bank line of credit to the aforementioned limit of $21,000,000. Management believes that such financing will provide adequate liquidity. At June 30, 1995, the Company was in violation of the covenants requiring maintenance of earnings and debt-to-worth ratios under the loan agreement. A waiver of these violations was given as of June 30, 1995, and the Company will be required to maintain the covenants thereafter. The Company has sought amendments to its License Agreement ("License") with DAUG-HOPPECKE GESELLSCHAFT FUR BATTERIESYSTEME MBH ("DAHO") and a separate agreement with DAHO and its affiliate, Hoppecke Battery Systems, Inc. ("HBSI"), and HBSI's parent company, ACCUMULATORENWERKE HOPPECKE Carl Zoellner & Sohn GmbH & Co KG ("Hoppecke"), to resolve issues pertaining to, inter alia, minimum royalties, extension of the License, and repair of products that exhibit certain defects. Negotiations, to date, have been unsuccessful, and the matter may eventually be submitted to arbitration for resolution. The Company does not believe that the outcome of this matter will have a materially adverse impact on its financial condition. PAGES 19 - 20 OF ANNUAL REPORT RESULTS OF OPERATIONS: Acme Electric Corporation reported net income of $992,000 or $.20 per share on record net sales of $91,127,000 for the year ended June 30, 1995, compared with net losses of $5,659,000 or $1.17 per share and $454,000 or $.09 per share for 1994 and 1993, respectively. The 1994 loss of $5,659,000 included a restructuring and impairment charge of $4,836,000 net of taxes, associated with the Company's restructuring of its aerospace business. The Company recorded approximately $896,000 of cash expenditures in 1995 against the 1994 restructuring reserves. These expenditures included severance and medical costs of $187,000, relocation costs associated with the consolidation and moving of the URDC operation to Tempe of $659,000, and miscellaneous costs of $50,000. At June 30, 1995, the two remaining restructuring reserves included $307,000 associated with impaired inventory and a $399,000 allowance related to the sale of the URDC facility. There are no future net cash requirements associated with the settlement of these reserves. As a result of the 1994 restructuring, 1995 depreciation and amortization was reduced by approximately $840,000. Additionally, overhead costs in the general administrative, selling and engineering areas of the division were reduced approximately $450,000 as a result of the consolidation. A portion of these savings was offset by ongoing transition problems in meeting production and shipment schedules resulting in increased material, labor and manufacturing overheads. Net losses from normal operations for the aerospace business were $1,219,000. It is anticipated that the continued transitional difficulties and their related negative impact on the earnings of the division will be overcome during fiscal 1996, at which point the benefits of the restructuring will be more fully realized. The fourth quarter of fiscal 1995 resulted in a net loss of $434,000 on record quarterly sales of $24,689,000, or a net loss per share of $.09. The primary causes of the loss were: significant material price increases, excessive health care costs incurred in the quarter, continued high transitional labor and overhead costs experienced by the Aerospace Division, a higher volume of product sales containing lower profit margins and costs incurred in moving into the new Cuba facility. It is estimated that the escalating material prices had a $500,000 net of taxes impact on the quarter. While the Company anticipates the future recovery of margins through product price increases, it may take several years for a full recovery. Additionally, the Company expects to redesign certain product lines for cost reduction and manufacture several products currently being purchased. Health care costs in the quarter exceeded normal experience by nearly $260,000 net of taxes, as a result of several major claims which reached maximum stop loss levels. Consolidated sales increased significantly ($14.9 million or 19.5%) over the previous year compared with an increase of 0.6% in 1994 over 1993 levels. Sales growth associated with several large OEM customers accounted for nearly $8.4 million of the $14.9 million increase, with the remainder relating to products sold through the distribution business. While manufacturing costs did increase (most significantly, material costs), the Company was unable to fully recover these costs through customer price increases during the year. Volume accounted for most of the increase in sales. Continued growth in sales will be dependent upon the continued success of major customer programs in the communications and computer markets, the pace of Acme's operational improvement at its Aerospace Division, the more effective utilization of the Company's current distribution network, and the success of international sales initiatives. Cost of sales as a percentage of sales was 74.4% in 1995, 72.2% in 1994 and 70.5% in 1993. The increase from 1994 to 1995 reflects the significant material price increases experienced in 1995, the short term higher effective labor costs experienced at the Power Distribution Products Division resulting from both business growth and interruption caused by implementation of modern manufacturing programs, high labor and manufacturing overheads in the Aerospace Division as a result of a prolonged transition, higher health costs primarily incurred in the fourth quarter of 1995, and costs incurred in moving into the new electronics facility. When comparing the cost of sales in 1995 with the cost of sales in 1994, it is important to note that approximately $590,000 of one-time period charges relating to the write-off of deferred contract costs (MD-90 program) and $300,000 of product warranty costs were included in 1994 cost of sales. Further, included in the cost of sales in 1995 is approximately $250,000 of engineering costs used in the support of manufacturing which in prior years were included in the engineering expense line. The increase from 1993 to 1994 is primarily attributable to the one-time charges noted in the previous sentence. Future reductions of cost of sales as a percentage of sales will depend on the Company's ability to pass through to customers the material cost increases experienced and the success of its manufacturing and material flow programs implemented to improve customer response capabilities and associated inventory costs. The Company is also working toward reducing the product costs associated with the Uninterruptible Power Supply (UPS) product business, as well as accelerating the pace in working through the transitional difficulties experienced at the Aerospace Division. Research and engineering expenses as a percentage of sales were 5.2% in 1995, compared to 7.4% in 1994 and 7.6% in 1993. This net decrease as a percentage of sales reflects both the overhead reductions made over the past two years in operations along with the higher sales levels achieved. In addition, approximately $250,000 of related engineering and quality support costs were recorded as manufacturing expense, rather than engineering expense, as in 1994 and 1993. Selling and administrative expenses as a percentage of sales were 16.5% in 1995, compared with 18.8% in 1994 and 20.3% in 1993. The percentage of sales decrease from 1994 to 1995 reflects approximately $600,000 of reduced administrative and selling overhead costs resulting from the 1994 Aerospace restructuring, including $384,000 of license amortization costs, offset by increased selling and administrative costs incurred in the Power Distribution Products Division, (most notably; commission costs) in support of the $8.4 million growth in sales. The primary factor for the percentage decrease is due to the higher sales level achieved in 1995 as compared to 1994. The net decrease from 1993 to 1994 reflects staff reductions along with a $243,000 profit recorded against 1994 selling and administrative costs relating to sale of the consumer automotive battery charger product line. Total interest expense decreased by approximately $560,000 from 1994 to 1995. However, included in the 1994 interest amount was approximately $1,160,000 of costs associated with the interest collar instrument. Interest costs have increased in 1995 over 1994 amounts when the 1994 collar related amounts are excluded, due primarily to higher interest rates combined with a higher average outstanding debt balance in 1995. Interest expense was approximately 8% higher in 1994 than 1993 due primarily to the $550,000 collar termination payment made in 1994. The Company's long-term debt originates from financing the aerospace business over the past eight years. Effective tax (benefit) rates for the last three years were 38.4%, (35.3%), and (35.7%), respectively. The fluctuations in the effective rates are generally reflective of the year-to-year variations in the permanent book-to- tax differences and changes in the state-allocation ratios. As a result, both 1994 and 1993 rates used to record tax benefit were lower than the effective rate used to record tax expense in 1995. PAGE 21 OF ANNUAL REPORT FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA DOLLARS IN THOUSANDS (EXCEPT PER SHARE, AND PER SQUARE-FOOT AMOUNTS)
YEARS ENDED JUNE 30 1995 1994 1993 1992 1991 _____________________________________________________________________________________________ Net Sales $91,127 $76,233 $75,812 $72,715 $79,887 Income (Loss) before cumulative effect of a change in accounting principle 992 (5,659) (673) 624 (7,604) Cumulative effect of a change in accounting principle -- -- 219 -- -- Net Income (Loss) 992 (5,659) (454) 624 (7,604) Income (Loss) per common share before cumulative effect of a change in accounting principle .20 (1.17) (0.14) 0.13 (1.60) Cumulative effect of a change in accounting principle -- -- 0.05 -- -- Net Income (Loss) per common share .20 (1.17) (0.09) 0.13 (1.60) Dividends per share (Common - cash) -- -- -- -- 0.16 - --------------------------------------------------------------------------------------------- AT END OF YEAR: Total assets $56,178 $46,505 $50,053 $50,286 $53,573 Working capital 24,990 20,465 24,332 24,501 4,103 Ratio of current assets to current liabilities 2.7:1 3.0:1 4.2:1 4.5:1 1.1:1 Investment in property, plant and equipment - net 14,657 12,669 15,561 16,638 16,907 Long-term debt 24,419 19,590 21,293 21,668 1,449 Total shareholders' equity 15,849 14,566 20,108 20,500 19,774 Equity per common share 3.22 3.02 4.19 4.28 4.15 Weighted average number of shares outstanding used to compute income (loss) per common share 4,924,887 4,854,061 4,812,429 4,777,473 4,741,329 - --------------------------------------------------------------------------------------------- Average number of hourly employees 505 444 436 456 543 Average number of salaried employees 251 252 267 307 360 Sales per full time employee equivalent (000's) $ 120 $ 109 $ 108 $ 95 $ 88 Square footage occupied 361,000 372,000 465,000 533,000 529,000 Sales per square foot $ 252 $ 205 $ 164 $ 137 $ 151
PAGE 22 OF ANNUAL REPORT CONSOLIDATED STATEMENT OF OPERATIONS DOLLARS IN THOUSANDS (EXCEPT PER SHARE AMOUNTS)
YEARS ENDED JUNE 30 1995 1994 1993 NET SALES $91,127 $76,233 $75,812 COSTS AND EXPENSES Cost of sales 67,837 55,071 53,418 Research and engineering expenses 4,791 5,666 5,757 Selling and administrative expenses 15,023 14,344 15,426 Interest expense 1,866 2,429 2,256 Restructuring costs -- 1,891 -- Impairment charge -- 5,584 -- - ------------------------------------------------------------------- TOTAL COSTS AND EXPENSES 89,517 84,985 76,857 - ------------------------------------------------------------------- Income (Loss) Before Income Taxes 1,610 (8,752) (1,045) Income Tax Expense (Benefit) 618 (3,093) (372) - ------------------------------------------------------------------- Income (Loss) before cumulative effect of a change in accounting principle 992 (5,659) (673) Cumulative effect of a change in accounting principle -- -- 219 - ------------------------------------------------------------------- NET INCOME (LOSS) $ 992 $ (5,659) $ (454) Net Income (Loss) per common share before cumulative effect of a change in accounting principle $ .20 $ (1.17) $(0.14) Cumulative effect of a change in accounting principle -- -- 0.05 - ------------------------------------------------------------------- NET INCOME (LOSS) PER Common Share $ .20 $ (1.17) $(0.09)
The accompanying notes are an integral part of these financial statements. PAGE 23 OF ANNUAL REPORT CONSOLIDATED BALANCE SHEET DOLLARS IN THOUSANDS
JUNE 30, JUNE 30, 1995 1994 - ---------------------------------------------------------- ASSETS CURRENT ASSETS - ---------------------------------------------------------- Cash $ 386 $ 160 Accounts receivable, net 17,253 15,246 Inventories, net 17,352 10,492 Income taxes receivable 325 223 Deferred income taxes 1,303 1,618 Other current assets 2,818 2,799 - ---------------------------------------------------------- TOTAL CURRENT ASSETS 39,437 30,538 - ---------------------------------------------------------- Property, plant and equipment, at cost: Land and buildings 11,224 9,156 Machinery and equipment 19,919 18,101 - ---------------------------------------------------------- Total property, plant and equipment 31,143 27,257 Less accumulated depreciation and amortization (17,467) (15,569) Facilities held for sale, net 981 981 - ---------------------------------------------------------- Property, plant and equipment, net 14,657 12,669 - ---------------------------------------------------------- Other assets 2,084 3,298 - ---------------------------------------------------------- TOTAL ASSETS $56,178 $46,505 - ---------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES - ---------------------------------------------------------- Accounts payable $ 9,307 $ 4,232 Accrued compensation and other 3,700 4,384 Current portion of long-term debt 1,440 1,457 - ---------------------------------------------------------- TOTAL CURRENT LIABILITIES 14,447 10,073 - ---------------------------------------------------------- Long-term debt 24,419 19,590 Other long-term liabilities 1,463 2,276 - ---------------------------------------------------------- TOTAL LIABILITIES 40,329 31,939 - ---------------------------------------------------------- SHAREHOLDERS' EQUITY - ---------------------------------------------------------- Common Stock, $1 par value authorized 8,000,000 shares issued 5,002,977 and 4,876,491 shares 5,003 4,876 Capital in excess of par value 18,807 18,161 Accumulated deficit (7,072) (8,064) - ---------------------------------------------------------- Total capital & accumulated deficit 16,738 14,973 Less treasury stock, at cost: 80,551 and 45,716 shares 889 407 - ---------------------------------------------------------- Total shareholders' equity 15,849 14,566 - ---------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $56,178 $46,505 - ----------------------------------------------------------
The accompanying notes are an integral part of these financial statements. PAGE 24 OF ANNUAL REPORT CONSOLIDATED STATEMENT OF CASH FLOWS Dollars in thousands
YEARS ENDED JUNE 30 1995 1994 1993 - ---------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 992 $ (5,659) $ (454) Adjustments to reconcile net income (loss) to net cash provided from operating activities: Depreciation and amortization 2,066 2,533 2,592 Cumulative effect of a change in accounting principle - - (219) Loss (gain) on sale/retirement of fixed assets 18 (229) 14 Deferred income taxes 542 (3,102) (209) Impairment charge - 5,584 - Change in assets and liabilities: Accounts receivable, net (2,007) (492) (1,341) Inventories, net (6,860) 2,756 144 Other assets 1,046 96 (935) Prepaid and accrued income taxes (82) 176 1,133 Accounts payable 5,075 857 (30) Reserves for restructuring, net (896) 632 (428) Accrued compensation and other (499) 1,203 601 - ---------------------------------------------------------------------- Net cash provided from (used in) operating activities (605) 4,355 868 - ---------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (4,072) (6,238) (1,563) Intangibles acquired - (1,516) - Proceeds from dispositions of fixed assets - 4,138 501 Investment in unconsolidated subsidiary (200) - - - ---------------------------------------------------------------------- Net cash used in investing activities (4,272) (3,616) (1,062) - ---------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase of long-term debt 21,445 11,169 3,070 Proceeds from employee stock purchase, stock option and dividend reinvestment plans 773 212 69 Purchase of treasury stock (482) (95) (7) Reduction of long-term debt (16,633) (12,096) (3,371) - ---------------------------------------------------------------------- Net cash provided from (used in) financing activities 5,103 (810) (239) - ---------------------------------------------------------------------- Net increase (decrease) in cash 226 (71) (433) - ---------------------------------------------------------------------- Cash at beginning of year 160 231 664 - ---------------------------------------------------------------------- Cash at end of year $ 386 $ 160 $ 231 - ---------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest $ 1,999 $ 2,512 $ 2,305 Income Taxes $ 158 $ (166) $ (1,360) - ----------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. PAGE 24 OF ANNUAL REPORT CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY DOLLARS IN THOUSANDS
Common Capital in Retained stock excess earnings Treasury $1 par of par (accumulated stock, value value deficit) at cost - ---------------------------------------------------------------------------- BALANCE JUNE 30, 1992 $4,815 $17,892 $(1,951) $256 - ---------------------------------------------------------------------------- Stock options exercised 12 50 - ---------------------------------------------------------------------------- Purchase of treasury shares 56 - ---------------------------------------------------------------------------- Sales of authorized shares Employee Stock Purchase Plan 3 12 Employee Savings Plan (401[K]) 9 32 - ---------------------------------------------------------------------------- Net Loss (454) - ---------------------------------------------------------------------------- BALANCE JUNE 30, 1993 4,839 17,986 (2,405) 312 - ---------------------------------------------------------------------------- Stock options exercised 31 138 - ---------------------------------------------------------------------------- Purchase of treasury shares 95 - ---------------------------------------------------------------------------- Sales of authorized shares Employee Stock Purchase Plan 3 17 Employee Savings Plan (401[K]) 3 20 - ---------------------------------------------------------------------------- Net Loss (5,659) - ---------------------------------------------------------------------------- BALANCE JUNE 30, 1994 4,876 18,161 (8,064) 407 - ---------------------------------------------------------------------------- Stock options exercised 123 610 - ---------------------------------------------------------------------------- Purchase of treasury shares 482 - ---------------------------------------------------------------------------- Sales of authorized shares Employee Stock Purchase Plan 1 8 Employee Savings Plan (401[K]) 3 28 - ---------------------------------------------------------------------------- Net Income 992 - ---------------------------------------------------------------------------- BALANCE JUNE 30, 1995 $5,003 $18,807 $(7,072) $889 - ----------------------------------------------------------------------------
None of the Company's authorized 500,000 shares of $10 par value preference stock has been issued. The accompanying notes are an integral part of these financial statements. PAGES 26 - 31 OF ANNUAL REPORT NOTES OF CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES: a. The consolidated financial statements include the accounts of the Company and its 100%-owned subsidiaries: Acme-URDC, Inc. and Acme Electric Corporation of Lumberton, NC. The Company also holds a 50% ownership in Acme Electric Limited, a Irish-based joint venture, which is accounted for under the equity method. All significant intercompany transactions and balances have been eliminated in consolidation. Effective July 11, 1994, Acme-URDC, Inc. was liquidated into Acme Electric Corporation. On June 30, 1995, Acme Electric Corporation of Lumberton, NC was liquidated into Acme Electric Corporation. Certain amounts in the prior years' consolidated financial statements and notes have been reclassified to conform with current year presentation. b. The Company and its subsidiaries file a consolidated federal income tax return and separate state returns. The Company follows the asset and liability approach in accounting for income taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial carrying values and the tax bases of the related assets and liabilities. The deferred income tax provision for the period is the difference in the assets and liabilities as of the beginning and end of the period. Income taxes are more fully described in Note 7. c. Inventories are costed at the lower of cost or market and determined principally on a FIFO (first in, first out) basis. d. The Company utilizes the percentage-of-completion method for long-term contracts in its Aerospace business. Revenues are recognized on the percentage-of-completion basis, measured by the percentage of material, labor and overhead cost incurred to date to total estimated material, labor and overhead costs for each long-term contract. e. Except for facilities held for sale, depreciation of property, plant and equipment is computed on the straight-line and the sum-of-the-years'-digits methods over the estimated service lives of the assets. At the time of retirement or other disposition of properties, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income. Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. The range of lives used as a basis for calculating depreciation is as follows: _____________________________________ YEARS Buildings 20-45 ______________________________________ Machinery and equipment 5-12 ______________________________________ Furniture and fixtures 8-10 ______________________________________ Automobiles and trucks 3-4 ______________________________________ f. Net income (loss) per common share computations are based upon the weighted average number of shares outstanding during each year as adjusted for outstanding stock options. 2. ACCOUNTS RECEIVABLE:
DOLLARS IN THOUSANDS 1995 1994 - ------------------------------------------------------------- Billed $16,439 $13,168 Unbilled 1,265 2,247 - ------------------------------------------------------------- Subtotal 17,704 15,415 - ------------------------------------------------------------- Less allowance for doubtful accounts (451) (169) - ------------------------------------------------------------- Total accounts receivables, net $17,253 $15,246 - -------------------------------------------------------------
Unbilled receivables are comprised of revenue amounts on long-term contracts which have been earned, but not yet billed. Management anticipates that all unbilled receivables at June 30, 1995, will be substantially billed and collected in fiscal 1996. 3. INVENTORIES:
DOLLARS IN THOUSANDS 1995 1994 - ------------------------------------------------------------- Raw Material $ 6,990 $ 3,765 - ------------------------------------------------------------- Work in Process 4,819 2,934 - ------------------------------------------------------------- Finished Goods 5,543 3,793 - ------------------------------------------------------------- Total Inventories $17,352 $10,492 - -------------------------------------------------------------
Inventories are reported net of reserves for obsolescence of $566,000 and $709,000 in 1995 and 1994, respectively. 4. LONG-TERM DEBT:
DOLLARS IN THOUSANDS 1995 1994 - ------------------------------------------------------------- Revolving loans at June 30 $16,988 $10,688 Secured term loan with 18 quarterly principal installments of $337,360 each, and interest paid monthly at the lower of prime plus 1.5%, or the Eurodollar (London Interbank Eurodollar) rate plus 3.0% 6,072 7,759 Capital lease obligation secured by related building, machinery and equipment at the Cuba, New York, facility payable in quarterly principal installments of $5,208, with interest paid monthly on the unpaid balance at a rate of prime plus 1.5%, through April 1, 2017. 469 490 Secured loan on the new Cuba facility payable over 20 years, with monthly payments for the first four years of interest only of $6,666, with monthly payments of $14,120, consisting of principal and interest at 4%, commencing Sept. 1, 1997, and continuing over the remaining sixteen years. 2,000 2,000 Other debt 330 110 - ------------------------------------------------------------------ Total debt $25,859 $21,047 - ------------------------------------------------------------------ Current portion (1,440) (1,457) - ------------------------------------------------------------------ Long-term portion $24,419 $19,590 - ------------------------------------------------------------------
The Company has a credit agreement with a major banking institution, which provides for borrowings and letters of credit up to a maximum of $27,072,000. This credit agreement is comprised of a $6,072,000 secured term loan and a $21,000,000 secured revolving credit line. The revolving loan carries an interest rate equal to the lower of Prime plus 1.0%, or the London Interbank Eurodollar rate plus 2.5%, and provided for an initial maturity date of December 1, 1995, with options for two one-year extensions under which the Company has exercised and extended the agreement through December 1, 1996. The Company pays a maximum annual commitment fee on this revolving credit loan of 1/4 of 1% on the unused portion. The credit agreement, as amended, contains certain restrictive covenants including, but not limited to, maintenance of earnings and interest coverage, and maintenance of minimum working capital and debt-to-worth ratios. Borrowings under this agreement are collateralized primarily by the Company's accounts receivable, inventories, and machinery and equipment. At June 30, 1995, the Company was in violation of the covenants requiring maintenance of earnings and debt to worth ratios under the loan agreement. A waiver has been extended to cover the defaults as of June 30, 1995, and the Company will be required to maintain the covenants thereafter. During the next five years, long-term debt matures as follows: 1996 - $1,440,000, 1997 - $1,522,000, 1998 - $1,544,000, 1999 - $1,544,000 and 2000 - $1,506,000. These amounts do not include any maturities relating to the revolving loan. 5. STOCK OPTION PLANS: Options were granted under the 1981 Incentive Stock Option Plan at the fair market value on the day preceding the date of the grant and are exercisable in varying amounts through 1999. The 1981 Plan expired in October, 1992. Options granted under the 1981 Plan expire in accordance with their respective terms. Options are granted under the 1989 Incentive Stock Option Plan at the fair market value on the day preceding the date of the grant and are exercisable in varying amounts through 2001. An amendment of the 1989 Stock Option Plan was approved at the annual meeting of shareholders held on October 28, 1994, to apply a formula for the award of further options after each year of profitable operation and to increase the number of shares subject to the Plan from 225,000 to 450,000. Options in accordance with the formula were granted as of September 1, 1995.
1981 PLAN 1989 PLAN SHARES SHARES - -------------------------------------------------------------- Options outstanding July 1, 1994 *77,758 110,783 Options granted - - Options exercised *(58,586) (60,783) Options cancelled - (3,000) Options outstanding 19,172 47,000 June 30, 1995 Options exercisable at June 30, 1995 19,172 42,000 Exercise prices per share $5.72-$8.56 $4.06-$4.88 Shares available for options at June 30, 1995 - 305,004 - --------------------------------------------------------------
*Excludes non-qualified options for 3,473 shares exercised during the fiscal year. 6. LEASES: The Company leases the manufacturing facilities, described in Note 4, under lease agreements, which have been capitalized, and various equipment under operating leases. Under the terms of the capital leases, the Company has included $1,794,000 in the cost of property, plant and equipment at June 30, 1995, and 1994. Accumulated depreciation on such assets was $1,004,000 and $966,000 at June 30, 1995, and 1994, respectively. Total rental expense under operating leases, which includes the headquarters facility, was $1,130,000, $1,026,000 and $690,000 in 1995, 1994 and 1993, respectively. Minimum future rental commitments under non-cancelable operating leases are approximately $816,000 in 1996, $702,000 in 1997, $477,000 in 1998, $412,000 in 1999, and $229,000 in 2000. 7. INCOME TAXES: The provision for income taxes includes the following:
YEARS ENDED JUNE 30 DOLLARS IN THOUSANDS 1995 1994 1993 - -------------------------------------------------------------- CURRENT Federal Expense (Benefit) $ 49 $ -- $ (164) State Expense (Benefit) 27 9 (1) - -------------------------------------------------------------- DEFERRED Federal Expense (Benefit) 518 (2,912) (170) State Expense (Benefit) 24 (190) (37) - -------------------------------------------------------------- TOTAL PROVISION (BENEFIT) $ 618 $(3,093) $ (372) - --------------------------------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS 109"), as of July 1, 1992. The cumulative effect of this change in accounting method increased fiscal year 1993 net income $219,000, or $.05 per common share. Total income tax expense (benefit) for fiscal years 1995, 1994 and 1993 resulted in effective tax (benefit) rates of 38.4%, (35.3%) and (35.7%), respectively. Differences between the statutory federal income tax rate and the effective income tax rate are as follows:
1995 1994 1993 - --------------------------------------------------------------- Statutory rate (benefit) 34.0% (34.0%) (34.0%) - --------------------------------------------------------------- Effect of state income taxes (benefit), net of federal tax benefit/expense 2.1% (1.3%) (2.4%) - --------------------------------------------------------------- Other 2.3% - .7% - --------------------------------------------------------------- Effective tax (benefit) rate 38.4% (35.3%) (35.7%) - ---------------------------------------------------------------
Deferred income taxes reflect the impact of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. These "temporary differences" are determined in accordance with SFAS 109. Principal items making up the net deferred tax assets and liabilities are as follows:
DOLLARS IN THOUSANDS 1995 1994 1993 - -------------------------------------------------------------- DEFERRED TAX ASSETS: Inventory $ 285 $ 383 $ 481 Depreciation 330 496 -- Accrued expenses 554 386 303 Restructuring and impairment charges 1,028 1,537 -- Loss contingencies 224 224 224 Supplemental Executive Retirement 383 377 50 Other 319 250 153 Loss carry forward 754 679 410 - -------------------------------------------------------------- 3,877 4,332 1,621 - -------------------------------------------------------------- DEFERRED TAX LIABILITIES: Depreciation -- -- 996 Pensions 885 842 413 State taxes 189 241 132 - -------------------------------------------------------------- 1,074 1,083 1,541 - -------------------------------------------------------------- NET DEFERRED TAX ASSET $2,803 $3,249 $ 80 - --------------------------------------------------------------
The Company has certain federal and state loss carry forwards available to offset future taxable income. The federal tax loss of $1,400,000 has fourteen years of carry forward period remaining. Portions of the state loss carry forwards, if not used, will expire in 1996. The future accumulated undistributed earnings of Acme Electric Limited (AEL), the Irish-based company in which Acme Electric Corporation currently is a 50% owner, are intended to be permanently reinvested in that business. At June 30, 1995, there was an accumulated deficit (through the start up period) of approximately $318,000, of which Acme Electric Corporation is half owner. In the event that future earnings were remitted to the Company, income taxes, based upon the applicable current rates, would be payable after reductions for any foreign taxes paid on such earnings and subject to applicable limitations. 8. EMPLOYEE BENEFITS RETIREMENT PLANS: The Company maintains three noncontributory defined benefit pension plans covering substantially all employees. The plan covering salaried employees provides pension benefits based upon the employee's individual yearly compensation. Plans covering hourly employees provide benefits of stated amounts for each year of service. It is the Company's policy to fund for each qualified plan at least an amount necessary to satisfy the minimum requirements of the Employee Retirement Income Security Act. The amount to be funded is subject to annual review by management and its consulting actuary. In recent years, funding contributions have been restricted due to application of Internal Revenue Code full-funding limitations to one or more of the plans. The Company also maintains a nonqualified Supplemental Executive Retirement Plan (SERP) for elected executive officers of the Company. The SERP provides benefits based upon an executive's compensation in the last year of service and is reduced by benefits received from the salaried plan. Six participants of this plan are retired and receiving payments under the plan. Approximately 6% of the plans' assets are invested in cash and equivalents, 67% are invested in equities and the remaining 27% are invested in fixed-income securities and annuities. Net periodic pension expense for the three years ended June 30, 1995, included the following components:
DOLLARS IN THOUSANDS 1995 1994 1993 - -------------------------------------------------------------- Service cost - Benefits earned during the period $ 521 $ 562 $ 567 Interest cost on projected benefit obligation 1,441 1,382 1,282 Actual return on assets (1,398) (1,078) (2,417) Net amortization, deferral and curtailment gain (505) (977) 479 Net periodic pension expense (income) $ 59 $ (111) $ (89) - --------------------------------------------------------------
FOR PLANS WHERE:
JUNE 30, 1995 JUNE 30, 1994 ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS - ------------------------------------------------------------------ DOLLARS IN THOUSANDS - ------------------------------------------------------------------ ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS: Vested benefit obligation $(17,434) $ 0 $(16,674) $(1,137) Accumulated benefit obligation (17,530) (1,205) (16,749) (2,413) Projected benefit obligation (18,716) (1,313) (18,156) (2,454) Plan assets at fair value 23,108 0 22,045 1,129 Funded Status: Assets in excess of (or less than) projected benefit obligation 4,392 (1,313) 3,889 (1,325) Transition (asset) or obligation (871) 414 (949) 407 - ----------------------------------------------------------------- Unrecognized prior service cost 2,832 0 2,756 196 Unrecognized net gain (4,086) (80) (3,562) (236) Accrued (prepaid) pension cost $ (2,267) $ 979 $ (2,134) $ 958 - -----------------------------------------------------------------
Pursuant to the provisions of Statement of Financial Accounting Standard No. 87, "Employers' Accounting for Pensions" (SFAS 87), the Company has recorded $226,000 of additional unfunded accumulated benefit obligation attributable to the SERP plan at June 30, 1995. These unfunded obligations are recorded in other long-term liabilities. In addition, an intangible asset of the same amount has also been recorded. At June 30, 1995, and 1994, the discount rate for the benefit obligations was 7.5%, the assumed annual rate of increase in future compensation used in determining the actuarial present value of projected benefit obligations was 4.5% for plans covering the salaried employees, and the expected long-term annual rate of return on plan assets was 8.5%. OTHER POST RETIREMENT BENEFITS: The Company adopted Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Post-Retirement Benefits Other Than Pensions" (SFAS 106), in 1994. The Company maintains a nonqualified benefit plan to provide post-retirement health care for elected officers of the Company. Six participants of this plan are retired and receiving payments under the plan. The Accumulated Post-Retirement Benefit Obligation at July 1, 1993, was $433,000, which is being amortized over 20 years. In addition to the assumed 7.5% discount rate used in the calculation of the benefit obligations, the assumed annual health care cost increase trend rate is 6.0%, with claim costs to increase based upon age, ranging from .5% to 6.0% per annum.
DOLLARS IN THOUSANDS 1995 1994 - -------------------------------------------------------------- Accumulated Post Retirement Benefit Obligation: Retirees $ 450 $ 328 Fully Eligible Active Plan Participants 0 80 - --------------------------------------------------------------- Other Active Plan Participants 53 36 - --------------------------------------------------------------- Total Accumulated Post- Retirement Benefit Obligation 503 444 Plan Assets at Fair Value 0 0 - --------------------------------------------------------------- Plan Assets in Excess of Accumulated Post-Retirement Benefit Obligation (503) (444) Unrecognized Transition Obligation 390 412 Unrecognized Net (Gain) Loss 56 6 - --------------------------------------------------------------- Accrued Post-Retirement Benefit Cost Recognized in Statement of Financial Position $ (57) $ (26) - --------------------------------------------------------------- NET PERIODIC POST-RETIREMENT BENEFIT COST: Service Cost $ 5 $ 4 Interest Cost 36 32 Amortization of Transition Obligation 22 22 - --------------------------------------------------------------- Net Periodic Post-Retirement Cost $ 63 $ 58 - ---------------------------------------------------------------
POST-EMPLOYMENT BENEFITS: The Company has evaluated the provisions of Statement of Financial Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for Post- Employment Benefits." SFAS 112 establishes accounting standards for employers who provide benefits to former or inactive employees, their beneficiaries, and covered dependents, after employment but before retirement. The Company provides post-employment benefits only to employees who are involuntarily terminated as a result of organizational restructuring or downsizing. This benefit is not provided to employees who are terminated in the event of facility closures. These benefits are limited to severance pay based upon length of service. The Company has not accrued for these post-employment benefits based upon historical data indicating a relatively stable work force, the relatively minor amounts paid in past years, and the fact that these costs cannot be reasonably estimated with any degree of certainty. 9. MAJOR CUSTOMERS: Power conversion equipment sales encompass markets wherein the demands of any one customer may vary greatly due to changes in technology and market strategy. Two customers of the Company accounted for 13.4% and 10.6% of fiscal 1995 sales, respectively, one of which also accounted for 10.6% of June 30, 1995, accounts receivable. In comparison, there was one customer of the Company that accounted for 10.0% of fiscal 1994 sales and no customers were above the 10% threshold in 1993. 10. RESTRUCTURING: In 1994, the Company recognized a pre-tax charge of $7,475,000 against earnings to establish reserves and record the impairment of assets associated with the restructuring of its aerospace business to include the closing of the Acme-URDC, Inc. facility in West Jordan, Utah, and the consolidation of operations into the facility in Tempe, Arizona. The 1994 charge included an impairment write-down of assets of $5,584,000, comprised of a $3,184,000 write-down of equipment and building improvements pertaining to its FNC battery facility in Tempe, Arizona, and a $2,400,000 write-down of intangible assets relating to the FNC Battery License. Additionally, restructuring reserves were established for impaired inventory, the allowance related to the sale of the URDC plant, severance and medical, relocation of the URDC business into the Tempe facility and miscellaneous costs. The following table sets forth the Company's restructuring reserves as reported at June 30, 1995, and 1994. All charges, are cash in nature. DOLLARS IN THOUSANDS
JUNE 30, 1995 JUNE 30, 1994 1995 (INCOME) 1995 DESCRIPTION BALANCE CHARGES EXPENSE BALANCE - --------------------------------------------------------------- Impaired inventory $ 310 $ (3) $ 0 $ 307 URDC plant write-down 419 (7) (13) 399 Employee severance and medical 250 (187) (63) 0 Relocation of the URDC business into the Tempe facility 547 (659) 112 0 Miscellaneous 76 (40) (36) 0 - --------------------------------------------------------------- Totals $1,602 $ (896) $ 0 $ 706 - ---------------------------------------------------------------
It is the intent of management to physically scrap the impaired inventory related to the restructuring during fiscal year 1996. The Company anticipates that it will either complete the sale or enter into a lease arrangement for the 23,000-square-foot facility in West Jordan, Utah, prior to June 30, 1997. 11. SHAREHOLDERS' RIGHTS PLAN: The Company's Board of Directors has adopted a shareholders' rights plan (the "Rights Plan") and declared a dividend of one Right for each two shares of the Company's Common Stock outstanding at December 6, 1993. The Rights do not become exercisable until the earlier of (i) ten days following the public announcement that a person or affiliated group (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of the Company's Common Stock, or (ii) ten days following the commencement of a tender offer, or exchange offer, that would result in a person or affiliated group becoming an Acquiring Person. Each Right entitles the registered holder to purchase one share of Common Stock at a purchase price of $50.00 per share. In the event that, at any time following the Distribution Date, (i) the Company is the surviving corporation in a merger with an Acquiring Person and its Common Stock is not changed or exchanged, (ii) a Person becomes the beneficial owner of more than 20% of the then outstanding shares of Common Stock, (iii) an Acquiring Person engages in one or more "self-dealing" transactions as set forth in the Rights Agreement between the Company and its transfer agent, 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 holder of the Rights will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Rights. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. 12. COMMITMENTS AND CONTINGENCIES: The Company was informed by the New York State Department of Environmental Conservation (DEC) on December 5, 1994, that the Municipal Waste Landfill, Cuba, NY, has been listed in the New York State Registry of Inactive Hazardous Waste Disposal Sites as a Class "2" site requiring remediation. Acme Electric Corporation has been determined by the DEC to be a potentially responsible party (PRP) by virtue of its disposal of wastes at the site. As a PRP, the Company may be subject to liability for the cost of site investigation and remediation. At this time, there is insufficient information available from which any reasonable estimate of such cost can be made. The Company did have insurance policies in effect during the period that waste was disposed of at the site, which the Company believes would provide coverage in the event the Company is liable. PAGE 31 OF ANNUAL REPORT REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Acme Electric Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Acme Electric Corporation and its subsidiaries at June 30, 1995, and 1994, and the 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. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP Buffalo, New York August 10, 1995 PAGE 32 OF ANNUAL REPORT COMMON STOCK PRICES AND DIVIDEND INFORMATION
Stock price - ------------------------------------------------------------ Year Ended June 30, 1995 High Low Dividends Paid - ------------------------------------------------------------ Fourth Quarter 38 3/4 18 3/4 -- Third Quarter 21 1/2 12 3/8 -- Second Quarter 14 8 3/4 -- First Quarter 9 7/8 7 1/2 -- - ------------------------------------------------------------ Year Ended June 30, 1994 - ------------------------------------------------------------ Fourth Quarter 9 1/4 6 1/2 -- Third Quarter 8 1/2 7 1/4 -- Second Quarter 11 3/8 6 3/8 -- First Quarter 8 5/8 6 3/8 --
Acme Electric Corporation's Common Stock is traded on the New York, Chicago, and Philadelphia Stock Exchanges. The approximate number of shareholders of record at June 30, 1995, was 1,351. EX-99.1 5 NEWS RELEASE - 4/28 EXHIBIT 99-1 FOR IMMEDIATE RELEASE ACME ELECTRIC REPORTS THIRD QUARTER RESULTS EAST AURORA, N.Y., April 28, 1995 -- Acme Electric Corporation (NYSE:ACE) today reported that the thirteen-week-period ending March 31, 1995, produced record sales of $24,184,000. Net income for the quarter was of $334,000, or $.07 per share, compared to sales of $18,250,000 and a net loss of $5,827,000, or $1.20 per share, for the comparable period of last year. Included in the quarter net loss of the prior year were one-time charges net of tax totaling $4,836,000. Sales for the thirty-nine-week period ending March 31, 1995, totaled $66,438,000, with net income of $1,426,000, or $.29 per share, compared to sales of $56,611,000, with a net loss of $6,219,000, or $1.28 per share, for the comparable period of the prior year. Robert J. McKenna, Chairman and CEO, stated that, "Sales in our commercial businesses are strong, and we expect continued improvement will occur. The restructured Aerospace Division continues to struggle with meeting its commitments effectively, and we are providing added resources from our other divisions to rectify this situation." Mr. McKenna also reported that, "The Electronics Division began shipping production quantities of a new power supply for Honeywell, and the alliance with AT&T for the marketing of uninterruptible power supplies continues to develop as planned. The Acme Transformer Division has launched a Latin American market-development initiative to identify new opportunities in that market, and its program to provide private-branded transformers to Siemens has commenced. Margins remain pressured because of escalating material costs." Mr. McKenna also announced that the Company has formed a joint venture named Acme Electric Limited with Qualtron, a Dublin, Ireland, based electronics company, to manufacture and sell uninterruptible power supplies to the European market. He stated that, "We are excited about this opportunity to apply our experience in the design and manufacture of these products to a market that offers us such great potential." Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion products for electronic and electric systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz. # # # # # ACME ELECTRIC CORPORATION Comparative Analysis (in thousands, except for per share data)
13 WEEKS 13 WEEKS 39 WEEKS 39 WEEKS ENDED ENDED ENDED ENDED MAR. 31, 1995 APR. 1, 1994 MAR. 31, 1995 APR. 1, 1994 ------------- ------------ ------------- ------------ Net Sales $24,184 $18,250 $66,438 $56,611 Net Income (Loss) 334 (5,827) 1,426 (6,219) Earnings (Loss) per share $.07 $(1.20) $.29 $(1.28) Weighted Number of Shares Outstanding Used to Compute Income Per Common Share 4,937,221 4,858,906 4,913,167 4,853,104
EX-99.2 6 NEWS RELEASE - BATTING EXHIBIT 99-2 FOR IMMEDIATE RELEASE ACME ELECTRIC NAMES ROBERT BATTING TO BOARD EAST AURORA, N.Y., May 17, 1994 -- Acme Electric Corporation (NYSE: ACE) today announced that Robert D. Batting has been elected to its board of directors. Mr. Batting has been President of Clearing/Niagara, a manufacturer of industrial press equipment, since 1991. He joined Clearing/Niagara after seven years as Group Vice President of Textron, where he was responsible for nine of Textron's thirty-five divisions. Mr. Batting is a graduate of Allegheny College in Meadville, Pennsylvania, and lives in Orchard Park, New York. Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion equipment for electronic and electrical systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz. # # # # EX-99.3 7 NEWS RELEASE - CLARK EXHIBIT 99-3 FOR IMMEDIATE RELEASE ACME ELECTRIC NAMES RANDALL CLARK TO BOARD EAST AURORA, N.Y., May 17, 1994 -- Acme Electric Corporation (NYSE: ACE) today announced that Randall L. Clark has been elected to its board of directors. Mr. Clark is Executive Vice President of Pratt & Lambert, where he heads the Consumer Products Group and oversees corporate administration. He joined Pratt & Lambert in 1992 after a lengthy career in the tire industry, culminating as Chairman and Chief Executive Officer of Dunlop Tire. Mr. Clark is a native of Syracuse, New York, and earned Bachelor of Arts and Master of Business Administration degrees at the University of Pennsylvania. Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion equipment for electronic and electrical systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz. # # # # EX-99.4 8 NEWS RELEASE - 5/26 EXHIBIT 99-4 FOR IMMEDIATE RELEASE ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY EAST AURORA, N.Y., May 26, 1995 -- Acme Electric Corporation (NYSE: ACE) today issued a response to the recent trading activity in their stock. Daniel K. Corwin, Senior Vice President said that, "The Company knows of no recent development which would yield the above-normal trading. The Company will release its annual report in August after the close of its fiscal year on June 30, 1995. The Company continues to progress as has been discussed in previous public releases, the most recent being May 1, 1995." # # # # EX-99.5 9 NEWS RELEASE - 6/13 EXHIBIT 99-5 FOR IMMEDIATE RELEASE ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY EAST AURORA, N.Y., June 13, 1995 -- Acme Electric Corporation (NYSE: ACE) today issued a response to the recent trading activity in their stock. Daniel K. Corwin, Senior Vice President said that, "The Company knows of no development which would yield the recent above-normal trading. The Company will release year-end results in August after the close of its fiscal year on June 30, 1995. The Company continues to progress as has been discussed in previous public releases, the most recent being May 1, 1995." # # # # EX-99.6 10 NEWS RELEASE - 6/27 EXHIBIT 99-6 FOR IMMEDIATE RELEASE ACME ELECTRIC RESPONDS TO RECENT STOCK ACTIVITY EAST AURORA, N.Y., June 27, 1995 -- Acme Electric Corporation (NYSE: ACE) reported that the New York Stock Exchange had contacted the Company regarding recent trading activity in its stock. Daniel K. Corwin, Senior Vice President and Chief Financial Officer stated that, "The Company is not aware of any developments that would explain such trading activity. The Company will release year-end results in August after the close of its fiscal year on June 30, 1995. The Company continues to progress as has been discussed in previous reports." # # # # EX-99.7 11 NEWS RELEASE - 7/12 EXHIBIT 99-7 FOR IMMEDIATE RELEASE ACME ELECTRIC RESPONDS TO RECENT DEVELOPMENTS EAST AURORA, N.Y., July 12, 1995 -- Acme Electric Corporation (NYSE: ACE) responded today to a report by Reuter News Service of an agreement with BAT International to provide a new battery system for electric vehicles. Robert J. McKenna, Chairman and chief executive officer, noted that the agreement is the culmination of an extensive effort by the Company to bring its Common Vessel Monoblock (CVM) technology to market. "We spent nearly a year seeking a strategic partner for our battery business. This new agreement will help take our CVM battery system from the laboratory to the highway," McKenna said. BAT International, located in Burbank, Calif., was founded in 1991 and presently manufactures three lines of vehicles at the CALSTART facility. CALSTART is an organization that has supported BAT and provides funding for various electric vehicle development projects. BAT will evaluate a small CVM prototype before Acme provides a full scale model for actual vehicle testing. Acme Electric Corporation has licensed proprietary technology from Daug Hoppecke Gesellschaft fur Batteriesysteme mbH (DAHO) of Germany to manufacture and market fiber nickel cadmium cells for the military and aerospace markets. The CVM battery systems for BAT will utilize this technology, but the CVM concept is expected to work with other battery chemistries as well. McKenna stated that, "Our experience with fiber nickel cadmium batteries under our license with DAHO, followed by our new CVM technology, prepares us to address the challenges of electric vehicle applications. The agreement with BAT International will enable us to advance this technology to the next level." Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion equipment for electronic and electrical systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz. # # # # EX-99.8 12 NEWS RELEASE - 7/20 EXHIBIT 99-8 FOR IMMEDIATE RELEASE ACME ELECTRIC RESPONDS TO RECENT NEWS REPORTS EAST AURORA, N.Y., July 20, 1995 -- Acme Electric Corporation (NYSE: ACE) responded today to a report on CNBC by financial correspondent Dan Dorfman. Robert J. McKenna, Chairman and CEO, stated that, "The CNBC report failed to note that our sales have increased through this fiscal year to record levels reflecting the continued progress of our major programs providing leading products to growing markets." Mr. McKenna went on to say that, "Margins remain under pressure, however, due to escalating material costs, and our Aerospace Division continues to struggle with meeting delivery commitments to customers, which will adversely affect our fourth quarter." The Company has previously disclosed the effect of material price increases and difficulties encountered in the consolidation of its military and aerospace business. Mr. McKenna added that, "Long-term opportunities look excellent, but, in the short term, much work remains to be done." The Company reported on its financial condition and plans to seek further financing following its third quarter ending March 31, 1995. The Company reported record sales of $24,184,000 and net income of $334,000 for the third quarter, and expects in August to report its results for the fourth quarter and full fiscal year ending June 30, 1995. On five separate occasions since October of 1994, the Company has responded to unusual trading activity in its stock by reporting that it knew of no developments that would explain such activity. Further information is available from the Company's previous reports. Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion equipment for electronic and electrical systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C., and Tempe, Ariz. # # # # EX-99.9 13 NEWS RELEASE - 8/14 EXHIBIT 99-9 FOR IMMEDIATE RELEASE ACME ELECTRIC REPORTS FOURTH QUARTER RESULTS EAST AURORA, N.Y., August 14, 1995 -- Acme Electric Corporation (NYSE: ACE) today reported that the results of consolidated operations for the full fiscal year ended June 30, 1995, were record net sales of $91,127,000 with net profit of $.20 per share, compared with net sales of $76,233,000 and a net loss of $5,659,000, or $1.17 per share, during the prior year. Results for the thirteen-week period ended June 30, 1995, were net sales of $24,689,000 and a net loss of $494,000, or $.09 per share, compared with net sales of $19,621,000 and net profit of $560,000, or $.11 per share, during the comparable period of the prior year. Robert J. McKenna, Chairman and Chief Executive Officer, stated that, "We are gratified by continued sales increases resulting in record sales for the year. We are working hard to overcome our immediate difficulties and to enjoy the full benefit of the growth that we have realized." Mr. McKenna added that, "Extraordinary material price increases and excessive health care costs combined to adversely affect fourth quarter margins. Although we incurred significant temporary expenses to enable our Aerospace Division to overcome difficulties encountered in the consolidation of its military and aerospace business into one facility, we look forward to improved performance in future periods." Acme had previously reported on its status in July. Founded in 1917, Acme Electric Corporation is a leader in the design and manufacture of power conversion equipment for electronic and electrical systems for industrial, commercial, residential, and military and aerospace applications. Corporate headquarters are in East Aurora, N.Y., with operations in Cuba, N.Y., Lumberton, N.C. and Tempe, Ariz. # # # # ACME ELECTRIC CORPORATION Comparative Analysis
FOR THE YEAR ENDED FOR THE 13 WEEKS ENDED 06/30/95 06/30/94 06/30/95 06/30/94 -------- -------- -------- -------- Net Sales $91,127 $76,233 $24,689 $19,621 Net Income (Loss) 992 (5,659) (494) 560 Earnings (Loss) Per Share $.20 $(1.17) $(.09) $.11 Weighted Number of Shares Outstanding Used to Compute Income Per Common Share 4,924,887 4,854,061 4,960,048 4,866,454
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