-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ESuzbFvGw/ahDPcgEMT/RjNEesQQSgZ9ABXVeyBukF9zoT+ytND0a5NLgkUx8xOK XzyOWzf1kY7y880VcOLX7Q== 0000950135-94-000207.txt : 19940330 0000950135-94-000207.hdr.sgml : 19940330 ACCESSION NUMBER: 0000950135-94-000207 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUGAT INC CENTRAL INDEX KEY: 0000008462 STANDARD INDUSTRIAL CLASSIFICATION: 3679 IRS NUMBER: 042022285 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-06176 FILM NUMBER: 94518576 BUSINESS ADDRESS: STREET 1: 89 FORBES BLVD STREET 2: P O BOX 448 CITY: MANSFIELD STATE: MA ZIP: 02048 BUSINESS PHONE: 5085434300 10-K 1 AUGAT FORM 10-K 1 Form 10-K for the period ended December 31, 1993 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________ Commission file number 1-6176 ---------- AUGAT INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 04-2022285 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 89 Forbes Boulevard, P.O. Box 448, Mansfield, Massachusetts 02048 - ----------------------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 508-543-4300 Securities registered pursuant to Section 12(b) of the Act: -------------
Title of Each Class Name of Each Exchange ------------------- on Which Registered --------------------- Common Stock $.10 Par Value New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 2, 1994 was $425,346,178. The number of shares of the Registrant's common stock outstanding on March 2, 1994 was 19,146,455. Documents Incorporated by Reference: Portions of the Proxy Statement for the Company's Annual Meeting of Shareholders to be held April 26, 1994 are incorporated by reference into Part III of this Form 10-K, to the extent described in such Part III. 2 FORM 10-K ANNUAL REPORT TWELVE MONTHS ENDED DECEMBER 31, 1993 AUGAT INC.
PAGE ---- PART I Item 1. Business 1 Item 2. Properties 7 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9 Item 6. Selected Financial Data 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 8. Financial Statements and Supplementary Data 13 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 34 PART III Item 10. Directors and Executive Officers of the Registrant 35 Item 11. Executive Compensation 39 Item 12. Security Ownership of Certain Beneficial Owners and Management 39 Item 13. Certain Relationships and Related Transactions 39 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 40 SIGNATURES 43
3 PART I ITEM 1 - BUSINESS - ----------------- General - ------- Augat Inc. ("Augat") is a Massachusetts corporation organized in 1946. As used herein the term the "Company" means Augat and, unless the context indicates otherwise, its consolidated subsidiaries. Augat designs and manufactures a broad range of electromechanical components for the electronics industry. The Company's principal products are interconnection components, including integrated circuit sockets and accessories, coaxial cable network and fiber optic interconnection products, packaging panels and interconnection test probes and systems. The Company also makes terminals, custom connector assemblies, wiring harnesses and specialty wiring systems for the automotive, communications, information processing and business equipment markets. Industry Segments - ----------------- The Company operates within a single segment of the electronics industry defined as the electromechanical component and subsystem sector. Although the Company operates internally with several profit centers, the products of these centers all have similar purposes or end uses, i.e., interconnecting or controlling the flow of electricity among components or boards and other assemblies within electronic equipment or systems. These products are used by manufacturers of electronic equipment or systems. These products are used by manufacturers of electronic equipment in their products to obtain specified interconnections of components, subassemblies or subsystems. Each profit center is responsible for the manufacture of its own products within its own facilities. The manufacturing equipment and technology used by each profit center, while similar, are not interchangeable because they are customized for the particular product. However, Augat's manufacturing labor force, for the most part, is similar and interchangeable, as are the basic materials that make up the Company's products. Each profit center has comparable capital-to-labor ratios, as well as labor costs as a percentage of sales, with the exception of the Company's wire harness business, which consumes twice as much labor cost as a percentage of sales as the other profit centers. Products of the various profit centers, while sold to different market segments, principally the automotive, computer, dataprocessing, telecommunications and CATV markets, are sold across the same geographic areas and marketed via similar methods. Augat's customers are primarily companies that manufacture or install electronic equipment. 1 4 Narrative Description of the Business - ------------------------------------- The Company designs, manufactures and markets electromechanical products used for the interconnection of circuits in electronic applications. Passive components used in electronic equipment, such as resistors and capacitors, and more complex active components, such as transistors, integrated circuits, hybrid circuits and microprocessors, must be attached and electrically interconnected to perform their specified functions. The Company's products principally relate to mounting and interconnecting components, testing or controlling the flow of electricity among components, boards and/or other assemblies within electronic equipment or systems. In general terms, the Company's products can be applied wherever computer logic is used, either in business or scientific systems or in the numerous products which incorporate computer functions. More specifically, the Company's products are used in computers, computer-aided engineering and manufacturing systems, industrial electronics, test equipment, medical electronics, business equipment, and additional applications in automotive, aerospace, telecommunications and broadband communications - including CATV - markets. Principal Products - ------------------ The Company's products include a broad range of integrated circuit sockets, miniature and subminiature switches, custom connector assemblies for the automotive and telecommunications industries, packaging panels, coaxial cable network and fiberoptic products and related hardware accessories and wire harness assemblies for the automotive industry. Integrated circuit sockets are mechanical devices into which integrated circuits are plugged to provide easy component replacement. The sockets are usually soldered to printed circuit boards by customers in order to connect integrated circuits, including microprocessors, large and very large scale integrated circuits and other dual-in-line packages, onto boards. Several thousand varieties of miniature and subminiature control switches of the toggle, slide, pushbutton and lighted types for use on printed circuit boards or elsewhere in electronic equipment are sold by the Company. Packaging panels are used to interconnect integrated circuits and other components. Each panel consists of a board with one or more copper etched and plated power and ground planes and incorporates sockets in particular patterns for placement of integrated circuits or other components on one side and wire-wrappable interconnections on the other. The Company also provides design and wiring services for purchasers of packaging panels and for the wiring of back planes and interconnection panels manufactured by others and provides spring loaded test probes and test fixtures for use in conjunction with functional board and device testers. The Company is a manufacturer of high density discrete connectors for both conventional board mounting and surface mounting. 2 5 The Company also manufactures a wide range of interconnection hardware accessories generally used on or in connection with printed circuit boards, such as test jacks and jumpers, relay and crystal sockets, breadboards, racks and enclosures, adaptor plugs and cable assemblies as well as marketing flat cable and related components manufactured by others. The Company is also a major supplier of connectors and electronic packaging modules and wire harnesses to two major U.S. automotive manufacturers and is actively participating in the development of interconnection components for future automotive model years. Such automotive programs include a "mass air flow module", an "actuating assembly" that triggers automatic seatbelts and an "electronic search module" for a luxury car audio system. Products manufactured for the telecommunication industry include central office distribution, remote-switching and cross-connect applications. The Company also is a leading supplier of coaxial connector, fiber optic and broadband products for the cable television and local area network (LAN) markets. Specifically in the CATV market, the Company provides single-part assemblies and connectors as well as line amplifiers to cable system operators who, in turn, construct cable television systems that distribute signals from the head-end to a home. The Company is pursuing market opportunities for its coaxial, broadband and fiber optic products in the rapidly evolving communications technology marketplace. Sources and Availability of Raw Materials - ----------------------------------------- The Company's manufacturing operations utilize a wide variety of mechanical components, raw materials and other supplies. It has multiple commercial sources of supply for all materials which are important to its business. Patents and Licenses - -------------------- The Company owns a number of domestic and foreign patents and has filed a number of additional patent applications. The Company's general policy has been to seek patent protection for those inventions and improvements likely to be incorporated in its products. While the Company believes that its patents and patent applications have value, it considers that its competitive position in the marketplace is not materially dependent upon patent protection and no individual patent or patent application is considered material to future operations. Seasonality - ----------- The only seasonal effect experienced by the Company is in the third quarter of the calendar year and is principally due to vacation shutdowns at selected Company locations and by many of its customers, particularly in Europe. Working Capital - --------------- The Company manufactures and markets a full line of standard catalog items and also an extensive line of special products to meet specific customer needs. In order to maximize its market opportunities, the Company maintains a high level of inventory of both raw materials and finished products. Sales by the Company are generally made on credit and customers typically take 30 to 70 days to make payment; thus, the Company also has significant amounts of money invested in accounts receivable. Despite the high level of accounts receivable and inventory required, the Company has generally been able to finance these assets from current operations. When additional working capital in excess of that generated by the business has been required, the use of short-term 3 6 borrowings, long-term debt and equity financing have been utilized. The Company's payment terms and the rights of return offered by it to customers and to it by manufacturers vary among such customers and manufacturers, but do not differ substantially from industry practice. The Company has generally allowed credits for returns by customers under appropriate circumstances. Marketing - --------- The Company sells to a broadly diversified group of customers located primarily in the United States, Western Europe, Far East and Canada. Sales are made to industrial and commercial customers within the computer, computer-aided engineering and manufacturing, industrial electronics, test equipment, telecommunications, aerospace, automotive and broadband communication markets. The Company's products are also widely used in both industrial and institutional research laboratories. During 1993 the Company's products and services were sold directly to approximately 5,600 customers and a substantial number of additional customers were served through a network of industrial electronic component distributors. Of total sales 20% was derived from sales through a number of distributors located throughout the world and no distributor accounted for as much as 2% of the Company's sales. One customer, Ford Motor Company, accounted for approximately 28% and another customer for 7% of the Company's sales in 1993; no other customer accounted for more than 4% of sales. The acquisition of National Industries, Inc. in August 1991, has changed the sales mix of the Registrants' major products as follows (see also Footnote Number 2 to the accompanying financial statements of the Registrant which are included under Item 8 hereof):
Percent of sales ---------------- 1993 1992 1991 ---- ---- ---- As As As Pro- Reported Reported Reported forma -------- -------- -------- ----- Interconnection Products Business 30% 35% 46% 37% Wiring Systems and Components Business 52% 50% 37% 49% Communication Products Business 18% 15% 17% 14% ---- ---- ---- ---- Total 100% 100% 100% 100% ==== ==== ==== ====
The Company markets its products and services through independent sales representatives and direct Company sales personnel working throughout the United States and abroad, including wholly owned marketing subsidiaries in the United Kingdom, France, Germany, Switzerland, Sweden, Italy, Japan, Canada and Australia and sales offices in other areas. In 1993 the Company's international sales amounted to approximately 21% of total sales. Approximately 51% of these sales were derived from Western Europe. The overall net margins on international sales are somewhat less than those obtained on sales made in the United States. The Company's international business is subject to risks customarily encountered in foreign operations, including fluctuations in monetary exchange rates. 4 7 Backlog - ------- The Company estimates that its backlog of unfilled orders at December 31, 1993 was $104 million compared with $90 million at December 31, 1992. Orders tend to fluctuate during the year according to customer requirements and business conditions, and the backlog level from quarter to quarter does not follow a consistent pattern. Although unfilled orders can be cancelled, the Company's experience has been that the dollar amount of cancelled orders is not material. Substantially all of the backlog is reasonably expected to be shipped within twelve months. Government Contracts - -------------------- The amount of the Company's business that may be subject to renegotiation of profits or termination of contracts or subcontracts at the election of the government is insignificant. Competition - ----------- The Company encounters competition in all areas of its business activity from a number of competitors but does not compete with any one company in all areas. Competitors range from some of the country's largest diversified companies to small and highly specialized firms. The Company competes primarily on the basis of technology, innovation, performance and reliability. Price and company reputation are also important competitive factors. Although there are no precise statistics available, the Company believes it is a principal factor in the markets in which it competes. Research, Development and Engineering - ------------------------------------- The Company maintains a continuous program of design, development and engineering of new products and improvement of existing products to meet the changing needs of its customers. The Company provides engineering assistance to its customers, designing products to fill their individual requirements. The majority of new product development, manufacturing research, quality control development, new equipment development and related research and development expenditures take place in product management groups involving engineering, marketing, manufacturing, quality control and general management personnel. These expenses are included in the categories of marketing, manufacturing and general administrative expenses. In calendar year 1993, 1992 and 1991 expenditures for such research, development and engineering were approximately $19 million, $19 million, and $16 million, respectively. Environmental Affairs - --------------------- The Company's manufacturing facilities are subject to numerous laws and regulations designed to protect the environment. The Company has spent substantial amounts to purchase, install, and operate pollution control equipment and conduct appropriate environmental audits. The Company believes that its efforts in this regard places it in substantial compliance with existing environmental laws and regulations. 5 8 In connection with the acquisition of National Industries, Inc. in 1991, the Company determined that possible contamination at certain National facilities in Alabama warranted additional study. The Company informed the State of Alabama about the possible contamination and its desire to voluntarily proceed with further study and, if necessary, remediation of the possible contamination. The Company has completed its investigation and provided this information to the State. The State has informed the Company that it believes further investigation is necessary. The Company, however, has considered and disagreed with the State's comments and is voluntarily proceeding to design and implement an appropriate remedy. The Company has included in its financial statements an allowance of $4.7 million for estimated environmental cleanup costs as of December 31, 1993. Employees - --------- The Company had approximately 4,300 employees as of December 31, 1993. None of the employees are covered by collective bargaining agreements and operations have never been interrupted by a work stoppage. The Company believes that relations with its employees are good. The Company also contracts for manufacturing labor and as of December 31, 1993 had approximately 2,000 contract laborers. Financial Information about Foreign and Domestic Operations and Export Sales - ---------------------------------------------------------------------------- Certain financial information concerning domestic and international operations and export sales can be found in Footnote number 10 to the accompanying financial statements of the Registrant which are included under Item 8 hereof. Balance of this page intentionally left blank. 6 9 ITEM 2 - PROPERTIES - ------------------- Information regarding the Company's active properties appears below:
Approximate facility size December 31, 1993 (Square Feet) ----------------------- Montgomery, Alabama 192,000 (1) Sanford, Maine 92,000 (1) Canton, Massachusetts 30,000 (1) Mansfield, Massachusetts 38,000 (1) Mashpee, Massachusetts 83,000 (1) North Attleboro, Massachusetts 52,000 (1) Boyne, Michigan 68,000 (1) Chesterfield, Michigan 66,000 (1) Chesterfield, Michigan 26,000 (2) Clinton, Michigan 96,000 (1) Livonia, Michigan 6,000 (2) Horseheads, New York 75,000 (1) Horseheads, New York 11,000 (2) Kent, Washington 58,000 (2) Sydney, Australia 4,000 (2) Mississauga, Canada 5,000 (2) Telford, England 41,000 (1) LaSeine, France 6,000 (2) Troisdorf, Germany 22,000 (2) Tsuen Wan, N.T., Hong Kong 1,000 (2) Milan, Italy 4,000 (2) Kawasaki, Japan 13,000 (2) Mishima, Japan 1,000 (2) Empalme, Sonora, Mexico 170,000 (2) Singapore 24,000 (2) Stockholm, Sweden 2,000 (2) Bioggio, Switzerland 188,000 (1) Zug, Switzerland 2,000 (2) --------- 1,376,000 ========= Total facilities up for sale or inactive as accounted for by restructuring reserves 352,000 ========= (1) Company - owned facility (2) Company - leased facility
7 10 The Company believes that its existing facilities are adequate and suitable for the manufacture and sale of its products and have sufficient capacity to meet its current requirements. Machine capacity is adequate although additional machine capacity is currently being added in the business to meet increasing demands for the Company's new products and for ongoing cost reduction programs. The Company anticipates no difficulty in retaining occupancy of any of its manufacturing, office or sales facilities through lease renewals prior to expiration or through month-to-month occupancy, or in replacing them with equivalent facilities. In addition to the above listed properties, the Company leases a small amount of other office/warehouse space in the United States and foreign countries. The amount of such space is not significant. See Note 7 - "Commitments and Contingencies" to the accompanying financial statements of the Registrant which are included under Item 8 hereof for information concerning the Company's obligations under all leases. ITEM 3 - LEGAL PROCEEDINGS - -------------------------- On April 26, 1985, the Company and its subsidiary, Isotronics, Inc. ("Isotronics"), commenced an action in the Bristol County Superior Court of Massachusetts against Aegis, Inc. ("Aegis"), and a former employee of Isotronics (the "Employee"), seeking damages to be trebled under the Massachusetts statute relating to unfair trade practices (M.G.L. c. 93A) and injunctive relief. The complaint alleged wrongdoing by the defendants in connection with the organization and operation of Aegis, which competed with Isotronics in the manufacture and sale of microcircuit packages. On May 21, 1985, the defendants filed a counterclaim, and added the Chairman of the Board of the Company as an additional defendant. The counterclaim alleged improper interference with a contract of Aegis; the making of disparaging remarks about the Employee and another officer of Aegis; that the action is groundless; and that it was commenced because of personal animosity toward the Employee. The counterclaim seeks damages of $7,500,000 for abuse of process, damages of $50,000 for interference with the contract, and damages of $7,500,000, to be trebled, for violation of the Massachusetts statute relating to unfair trade practices (M.G.L. c 93A). A reply was filed which denied the material allegations of the counterclaim. On May 13, 1985, Aegis commenced an action in the U.S. District Court for the District of Massachusetts. The allegations of the amended complaint in the federal case generally are similar to those of the counterclaim in the Superior Court case, but include an additional claim that the Company and Isotronics had attempted to monopolize interstate commerce in violation of the Sherman Act. The allegations with respect to damages are similar to those of the Superior Court counterclaim. Assets of Isotronics were sold by the Company in May 1989, but all claims relating to the litigation were retained by the Company. On August 31, 1989 the Bristol County Superior Court ruled that Aegis and the Employee violated the Massachusetts statute relating to unfair trade practices. The court ruled further that Aegis and the Employee had failed to prove the counterclaims they had asserted against the Company, Isotronics and an officer of the Company. Aegis and the Employee appealed the decision and on October 1, 1990, the case was argued to the Massachusetts Supreme Judicial Court. The court rendered a decision on January 16, 1991, affirming the trial court's finding of a knowing and willful violation of the Massachusetts Unfair Trade Practices statute. A further trial to determine the amount of damages to be awarded against Aegis and the Employee took place in the Bristol County Superior Court from January 6, 1992 until February 20, 1992. 8 11 On November 2, 1992, the Court issued a 173 page Memorandum of Decision and Order ("Order"). The Order concluded that the illegal conduct of defendants Aegis and Employee proximately caused the Company to suffer $14,140,000 in lost profits during the period January 1, 1985 until March 31, 1987. In 1987, a joint venture owned by Olin Corporation ("Olin") and Asahi Glass Co, Ltd. purchased the stock of Aegis. Because of alleged indemnity obligations which may run from Olin to the defendant Employee, the Company moved to amend its Complaint and add Olin as a defendant. On November 25, 1992 the court allowed the Company's motion. Olin moved to dismiss that complaint. The Court denied Olin's motion on December 14, 1992. At the same time the Court granted the Company a preliminary injunction restraining Olin from modifying any obligation it may have to defendant Employee. Olin has renewed its objections to the Company's complaint. On December 14, 1992, final judgment was entered entitling the Company to recover from the defendants jointly and severally, the sum of $14,140,000 in compensatory damages, plus costs of $376,632.98, interest of $10,744,460.47, and attorneys' fees of $1,216,188.06, for a total of $26,477,281.51. The judgment also awarded the Company noncompensatory damages of $14,140,000. The judgment also found in favor of the former Chairman of the Board on all counts of the defendants' counterclaims against him. The defendants have appealed the judgment, generally challenging the entire damages decision. The Company has filed a cross appeal limited to the question of whether a portion of the damages award should be assessed against each of the defendants jointly instead of jointly and severally. The appeal of the damages decision was argued before the Supreme Judicial Court in early October 1993, and the Court has not issued its decision. On September 4, 1992, the Company filed suit in the United States District Court for the District of Massachusetts against June M. Collier ("Collier"). This suit arises out of an Agreement of Merger which the Company entered into in August 1991, and through which an Alabama manufacturing company, National Industries, Inc. was merged into Augat National Inc., a wholly owned subsidiary of the Company. The Company alleges that the defendant, who was the sole stockholder of National Industries, breached certain warranties she made in connection with the merger and misrepresented the financial and operating conditions of National Industries. The suit also alleges a violation of Mass. Gen. Laws c. 93A. Collier has answered the company's complaint and asserted counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, violation of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, duress, misrepresentation and violations of Mass. Gen. Laws c. 93A. The Company has responded to Collier's counterclaims and has denied all of the substantive allegations. Management believes that Collier's counterclaims are without merit and will defend them vigorously. Discovery is scheduled to end on June 15, 1994. Trial has been set for August 1, 1994. There are no other material legal proceedings to which the Registrant is a party. Routine litigation incidental to its business is immaterial. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ Not Applicable. PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - -------------------------------------------------------------------------- The Company's Common Stock is currently traded on the New York Stock Exchange under the symbol "AUG". The following table sets forth the range of high and low closing prices for its Common Stock on a quarterly basis for each of the Company's last three fiscal years.
Closing Price Range Common Stock Dividends 1993 High Low Paid - ----- ----- ----- --------- 1st Quarter $13.25 $11.25 - 2nd Quarter 16.88 12.63 - 3rd Quarter 21.75 16.50 - 4th Quarter 21.25 15.50 - ------- ------- --------- $21.75 $11.25 -
9 12 1992 - ----- 1st Quarter $11.00 $ 8.63 - 2nd Quarter 12.00 10.25 - 3rd Quarter 13.25 9.88 - 4th Quarter 12.25 10.38 - ------- ------- ------- $13.25 $ 8.63 - 1991 - ----- 1st Quarter $13.00 $ 9.13 $.10 2nd Quarter 14.00 11.25 .10 3rd Quarter 13.00 11.13 .10 4th Quarter 12.25 7.88 .10 ------- ------- ------ $14.00 $ 7.88 $.40
The Company, in December 1991, suspended its quarterly common stock dividend in order to maintain a strong balance sheet and to ensure Augat's financial long-term objectives. As discussed in Note 3 of the Notes to Consolidated Financial Statements which are included under Item 8 hereof, the Company's senior secured notes impose certain restrictions on the payment of dividends. Management intends to reinstate a dividend when it is feasible and prudent. The approximate number of holders of record of the company's Common Stock at December 31, 1993 was 1,648. ITEM 6 - SELECTED FINANCIAL DATA
(In thousands except per share data) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------------------- Sales, Income and Dividends Net sales $420,263 $361,718 $281,602 $299,193 $306,647 Cost of products sold 328,964 287,524 219,358 212,437 221,016 Selling, general and administrative expenses 63,492 60,920 62,301 63,940 62,566 Restructuring costs 22,000 2,500 Other income (expense) - net (4,207) (3,519) 463 1,133 1,221 Income (loss) before taxes and minority interests 23,600 9,755 (21,594) 23,949 21,786 Provision for taxes 8,000 3,169 468 6,816 6,886 Net income (loss) 15,600 6,586 (22,062) 17,133 14,900 Earnings (loss) per share .83 .36 (1.21) .95 .83 Cash dividends per share .40 .40 .40 Net income (loss) as percent of net sales 3.7% 1.8% (7.8%) 5.7% 4.9% Net income (loss) as percent of share- holders' average equity 8.1% 3.7% (11.4%) 8.7% 8.1% Working Capital Current assets 176,508 157,641 154,941 153,582 140,549 Current liabilities 57,580 50,767 60,930 37,292 40,603 Working capital 118,928 106,874 94,011 116,290 99,946 Current ratio 3.1 to 1 3.1 to 1 2.5 to 1 4.1 to 1 3.5 to 1 Other Data Property, plant, and equipment - net 99,999 98,262 101,795 105,468 99,406 Total assets 317,860 295,448 293,229 272,541 252,032 Long-term debt 45,797 56,939 50,236 12,864 16,098 Debt/Equity ratio 22.7% 31.4% 28.4% 6.1% 8.7% Shareholders' equity 201,611 181,481 176,633 209,389 185,519 Average common shares outstanding 18,789 18,370 18,182 18,050 17,962
10 13 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------ As an aid to understanding the Company's operating results, the following table indicates the percentage of sales that each income statement item represents, and the percentage increase or decrease in such items for the years indicated.
Percentage Increase (Decrease) --------------- Years ended December 31, 1993 1992 ------------------------- vs. vs. 1993 1992 1991 1992 1991 ------ ------ ------ ------ ------ Sales 100.0% 100.0% 100.0% 16.2% 28.4% Cost of goods sold 78.3 79.5 77.9 14.4 31.1 Gross Margin 21.7 20.5 22.1 23.0 19.1 Selling, general, etc. 15.1 16.8 22.1 4.2 (2.2) Restructuring costs - - 7.8 * * Other (income) expense 1.0 1.0 (.2) 19.6 * Provision for taxes 1.9 .9 .2 152.4 * ------ ------ ------ ------ ------ Net income (loss) 3.7% 1.8% (7.8%) 136.9% * ====== ====== ====== ====== ====== * Not meaningful
Sales by Major Product Area A breakdown of sales for calendar years 1993, 1992 and 1991 by major product is as follows:
Net Sales (In thousands) 1993 % 1992 % 1991 % ------ ---- -------- ---- -------- ---- Interconnection Products Business $129,000 30% $127,000 35% $130,000 46% Wiring Systems and Components Business 217,000 52% 180,000 50% 105,000 37% Communications Products Business 74,000 18% 55,000 15% 47,000 17% -------- ---- -------- ---- -------- ---- Total $420,000 100% $362,000 100% $282,000 100% -------- ---- -------- ---- -------- ----
Results of Operations The Company continued to grow sales in 1993 over 1992 due to the significant improvement in the domestic automotive markets and increased market penetration in the cable television and telecommunications segments of the communications industry. The sales improvement in 1992 over 1991 was attributable to the Company's expanded role in the worldwide automotive markets as well as substantial sales growth in the Communications Products Business. Sales in 1991 were affected in all major business units by the worldwide recession. International sales were $89 million, $92 million and $79 million for the years 1993, 1992 and 1991, respectively. Sales in 1991 included $28 million from National Industries, Inc. acquired in August 1991. See Note 2 of the Notes to Consolidated Financial Statements which are included under Item 8 hereof. The Interconnection Products Business sales remained flat for the three years ended 1993 as the computer industry continued its lackluster performance. Increases in new product sales have been offset by reduction in sales of mature product lines and price reductions during this three year period. Sales in the Wiring Systems and Components Business increased worldwide 21% in 1993 with domestic sales increasing 27% and international sales decreasing 22% compared with 1992. For 1992, domestic sales increased 88% and international sales increased 14% when compared to 1991. Worldwide sales in the Communication's Business increased 35% in 1993 over 1992 after increasing 17% in 1992 over 1991. The division serves two primary markets: cable television and telecommunications. Both markets continued their growth improvement in 1993 that started in 1992. 11 14 Sales in 1993 continued its growth due to increased domestic volume in the automotive business, improvement in worldwide communications sales offset in part by a decline in international automotive sales. Cost of products sold decreased by 1.2% of sales in 1993 as the Company benefitted from its on-going cost control and productivity programs, increase in new products offerings which were offset by selective selling price decreases. These costs increased by 1.6% of sales in 1992 compared to 1991 due to the inclusion for a full year of National Industries which has higher labor and material costs compared to the other business units. Selling, general and administrative expenses (SG&A) continued to decrease as a percentage of sales in 1993. This resulted from the leveraging of such expenses due to increased volume, along with the Company's ongoing concerted effort to maintain strong cost control in this area. Management intends to maintain SG&A expenses in the 16% to 18% range of sales. In 1991, the Company reviewed the operations and asset base of the Interconnection Products Business and it was determined that the recession has shortened the life-cycle of some of the division's mature products resulting in substantial excess manufacturing capacity. Accordingly, this resulted in a $22 million restructuring charge against 1991 operating results. The major components of the charge include $18 million to close two manufacturing facilities, discontinue selected mature product lines, consolidate two administrative offices into one, and reduce administrative and management personnel. The 1991 restructuring program has been substantially completed in 1993. Additionally, a $4 million reserve was provided for the write-down of two unsold facilities. Interest income decreased in 1993 and 1992 due to excess cash being reinvested in the business units and lower investment rates compared to the prior year. Interest expense decreased in 1993 due to reduction in long-term debt. For 1992, interest expense increased substantially from 1991 due to the full year impact of the $45 million debt incurred in September 1991 for the acquisition of National Industries, Inc. Effective January 1, 1993, the Company adopted Financial Accounting Standard No. 109, "Accounting for Income Taxes" (SFAS 109). This change, as of that date, did not have a significant impact on the financial statements. Taxes in 1993 and 1992 were 33.9% and 32.5% of income, respectively, compared to the statutory rate in 1993 and 1992 of 35% and 34%, respectively. The loss incurred in 1991 as a result of the restructuring was not tax benefitted due to the lack of income earned in the jurisdictions where the charge was incurred. The effective statutory rate for 1993 and 1992 was negatively impacted by taxes imposed by various domestic operations and by higher taxes on international earnings where the Company operates. These higher taxes were offset by the tax benefit associated with the 1991 restructuring charge. An income tax provision of $.5 million was reported in 1991 due to income earned in various tax jurisdictions. See Note 5 of the Notes to Consolidated Financial Statements which are included under Item 8 hereof for the reconciliation of the provision for income taxes. Liquidity and Capital Resources The Company maintains sufficient liquidity and has the resources to fund its operations under current business conditions. The Company in 1993 amended its revolving credit agreement with three banks by increasing its maximum borrowing to $40 million. As of December 31, 1993, the Company had outstanding borrowings of $1 million under this credit facility. During 1993, the Company reduced its total debt by $14.2 million. The Company's financial condition improved in 1993 as working capital increased to $119 million compared to $107 million in 1992. At year end 1993, long-term debt represented 22.7% of equity compared with 31.4% for 1992. Income generated from operations along with established credit facilities is sufficient to cover expected growth in the next few years. Capital expenditures in 1994 are projected to be in the $20 to 22 million range. The Company, in December 1991, suspended its quarterly common stock dividend in order to maintain a strong balance sheet and to ensure Augat's financial long-term objectives. Management intends to reinstate a dividend when it is feasible and prudent. 12 15 In December 1992, the Company was awarded a $40 million judgment as a result of a lawsuit involving unfair trade practices. The lawsuit is under appeal and the eventual amount to be received is not determinable at this time. The book value of the Company's common stock at December 31, 1993, was $10.60. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The following financial statements and financial statement schedules are submitted herewith:
Financial Statements: Pages ------ Independent Auditors' Report 14 Consolidated Balance Sheets at December 31, 1993 and 1992 15 Consolidated Statements of Income for the years ended December 31, 1993, 1992 and 1991 17 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991 18 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991 19 Notes to Consolidated Financial Statements 20 Financial Statement Schedules: Schedule V - Property, Plant and Equipment 29 Schedule VI - Accumulated Depreciation, and Amortization of Property, Plant and Equipment 30 Schedule VIII - Valuation and Qualifying Accounts 31 Schedule IX - Short-Term Borrowings 32 Schedule X - Supplementary Income Statement Information 33
13 16 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Augat Inc. Mansfield, Massachusetts We have audited the accompanying consolidated balance sheets of Augat Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the consolidated financial statement schedules listed at Item 8. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Augat Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE Boston, Massachusetts January 27, 1994 14 17 CONSOLIDATED BALANCE SHEETS
December 31, (In thousands) 1993 1992 - ---------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 8,540 $ 28,323 Accounts receivable - less allowance for doubtful accounts, $1,129 in 1993 and $1,451 in 1992 73,633 53,084 Refundable income taxes 138 113 Inventories: Finished goods 33,493 31,447 Work in process 26,415 17,491 Raw materials 26,654 24,428 -------- --------- Total inventories 86,562 73,366 Deferred income taxes 4,556 Prepaid expenses 3,079 2,755 -------- --------- Total current assets 176,508 157,641 -------- --------- Property, Plant, and Equipment: Land 3,528 4,204 Building and building improvements 54,674 56,830 Machinery and equipment 115,155 105,931 Furniture and fixtures 20,603 19,781 Construction in progress - buildings and machinery 10,010 6,942 -------- --------- Total 203,970 193,688 Less accumulated depreciation 103,971 95,426 -------- --------- Property, plant, and equipment - net 99,999 98,262 -------- --------- Other Assets: Goodwill - net 26,759 28,037 Property held for sale 9,179 6,801 Other 5,415 4,707 -------- --------- Total other assets 41,353 39,545 -------- --------- Total $317,860 $295,448 ======== =========
See notes to consolidated financial statements. 15 18 CONSOLIDATED BALANCE SHEETS
December 31, (In thousands) 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 1,000 $ 3,900 Current maturities of long-term debt 2,130 2,290 Accounts payable 28,353 21,016 Federal, state and foreign taxes payable 3,352 1,361 Accrued restructuring costs 1,751 2,952 Accrued compensation and benefits 10,193 8,653 Other accrued expenses 10,801 10,595 -------- --------- Total current liabilities 57,580 50,767 -------- --------- Long-Term Debt 45,797 56,939 Deferred Income Taxes 12,872 6,261 Commitments and Contingencies Shareholders' Equity: Common stock - par value $.10 per share: Authorized 60,000,000 shares: Issued and outstanding, 19,032,767 in 1993 and 18,421,624 in 1992 1,903 1,842 Paid-in capital 69,262 62,442 Retained earnings 118,878 103,278 Cumulative translation adjustment 11,923 14,121 Treasury stock, at cost: 16,700 shares at 1993 and 1992 (110) (110) Unearned compensation - restricted stock awards (245) (92) -------- --------- Shareholders' equity 201,611 181,481 -------- --------- Total $317,860 $295,448 ======== =========
See notes to consolidated financial statements. 16 19 STATEMENTS OF CONSOLIDATED INCOME
For the Years Ended December 31, (In thousands except per share data) 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------- Net sales $420,263 $361,718 $281,602 Cost of products sold 328,964 287,524 219,358 -------- -------- -------- Gross margin 91,299 74,194 62,244 Selling, general and administrative expenses 63,492 60,920 62,301 Restructuring costs 22,000 -------- -------- -------- Income (loss) from operations 27,807 13,274 (22,057) Other income (expense): Interest income, etc. 386 1,486 2,905 Interest expense (4,593) (5,005) (2,442) -------- -------- -------- Net (4,207) (3,519) 463 -------- -------- -------- Income (loss) before taxes on income 23,600 9,755 (21,594) Provision for taxes on income 8,000 3,169 468 -------- -------- -------- Net income (loss) $ 15,600 $ 6,586 $(22,062) -------- -------- -------- Earnings (loss) per share $ .83 $ .36 $ (1.21) ======== ======== ========
See notes to consolidated financial statements. 17 20 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In thousands) For the Years Ended December 31, 1993, 1992 and 1991 - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock --------------------- Number of Cumulative Shares Paid-in Retained Translation Outstanding Amount Capital Earnings Adjustment --------------------------------------------------------------- Balance, December 31, 1990 18,086 $1,809 $58,746 $126,019 $23,172 Common stock issued under employee benefit plans 81 8 821 Stock issued in connection with an acquisition 189 19 2,181 Net loss (22,062) Dividends paid (7,265) Foreign currency translation adjustment (6,590) ------ ----- ------ -------- ------- Balance, December 31, 1991 18,356 1,836 61,748 96,692 16,582 Common stock issued under employee benefit plans 66 6 694 Net income 6,586 Foreign currency translation adjustment (2,461) ------ ----- ------ -------- ------- Balance, December 31, 1992 18,422 1,842 62,442 103,278 14,121 Common stock issued under employee benefit plans 611 61 6,820 Net income 15,600 Foreign currency translation adjustment (2,198) ------ ----- ------ -------- ------- Balance, December 31, 1993 19,033 $1,903 $69,262 $118,878 $11,923 ====== ===== ====== ======= =======
See notes to consolidated financial statements. 18 21 STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended December 31, (In thousands) 1993 1992 1991 - ---------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities: Net income (loss) $15,600 $ 6,586 $(22,062) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 15,758 16,040 16,041 Amortization of restricted stock awards 169 131 105 Provision for non-current asset write-down 600 13,844 Gain on the sale of property, plant, and equipment (97) (213) (420) Deferred income taxes - net 2,055 831 (7,484) Loss applicable to minority interests (82) Increase (decrease) in cash from changes in assets and liabilities, net of effects from business acquired: Accounts receivable (20,549) (2,496) 13,721 Refundable income taxes (25) 962 300 Inventories (13,196) 117 (436) Prepaid expenses (324) (486) 1,613 Other assets (703) (3,003) (838) Accounts payable 7,337 4,051 (9,814) Income taxes payable 1,991 598 (857) Accrued restructuring, compensation and other expenses 545 (9,266) (1,644) Effect of exchange rate changes on current assets and liabilities (other than cash) (693) (701) (488) ------- ------- ------- Net cash provided by operating activities 8,468 13,151 1,499 ------- ------- ------- Cash Flows From Investing Activities: Purchase of property, plant, and equipment (20,377) (14,495) (14,240) Proceeds from the sale of property, plant, and equipment 407 2,924 2,446 Payment for business acquired (38,201) ------- ------- ------- Net cash used for investing activities (19,970) (11,571) (49,995) ------- ------- ------- Cash Flows From Financing Activities: Cash dividends paid (7,265) Proceeds from short-term borrowings 29,700 12,900 45,000 Payments for short-term borrowings (32,600) (58,000) Proceeds from long-term debt 49,000 Payments for long-term debt (11,302) (4,269) (2,483) Common stock issued under employee benefit plans 6,560 592 857 ------- ------- ------- Net cash provided (used) by financing activities (7,642) 223 36,109 ------- ------- ------- Effect of exchange rate changes on cash (639) (1,006) (2,705) Net changes in cash and cash equivalents (19,783) 797 (15,092) Cash and cash equivalents beginning of year 28,323 27,526 42,618 ------- ------- ------- Cash and cash equivalents end of year $ 8,540 $28,323 $ 27,526 ======= ======= =======
See notes to consolidated financial statements. 19 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) 1. SUMMARY OF ACCOUNTING POLICIES Basis of Consolidation The accompanying consolidated financial statements include the accounts of the Company and all majority-owned domestic and foreign subsidiaries. Long-term investments in affiliated companies representing ownership interests of 20% to 50% are accounted for on the equity method. Foreign subsidiaries are included on the basis of fiscal years ended November 30. Material intercompany transactions and balances have been eliminated. Inventories Inventories are stated at the lower of cost (principally, first-in, first-out method) or market. Property, Plant, and Equipment Property, plant, and equipment is recorded at cost. For financial reporting purposes, depreciation is provided using the straight-line method based on the estimated useful lives of the various classes of assets. The estimated useful lives for buildings and improvements are 5 to 40 years; for machinery and equipment 3 to 10 years; and for furniture and fixtures 3 to 10 years. Maintenance, repairs and minor improvements are charged to expense as incurred, while additions, major improvements and renewals of fixed assets are capitalized. The cost of property retired or sold together with the accumulated depreciation is removed from the respective accounts and any difference, less proceeds from sale, is charged or credited to income. Revenue Recognition Sales are recognized at the time of shipment. Income Taxes The Company, effective January 1, 1993, adopted the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The cumulative effect on prior years at the date of adoption was not material to the results of operations or the financial position of the Company. SFAS 109 uses an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. Previously, the Company used the Statement of Financial Accounting Standards No. 96, "Accounting for Income Taxes" (SFAS 96), which employed an asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts. Research and Development Research and development costs are expensed as incurred. Such costs amounted to approximately $19,000, $19,000 and $16,000, in 1993, 1992 and 1991, respectively. Translation of Foreign Currencies Assets and liabilities of foreign operations are translated at year-end exchange rates. Revenues and expenses are translated using average exchange rates. The resulting translation adjustment is reported as a separate component of shareholders' equity. Gains and losses from foreign currency transactions are reflected in net income. Other Assets The excess of the purchase price of acquired companies over the fair value of net identifiable assets at dates of acquisition has been recorded as goodwill and is being amortized on a straight-line basis over various periods not exceeding twenty-five years. Accumulated amortization at December 31, 1993 and 1992, was $3,498 and $2,206 respectively. Amortization of goodwill was $1,292, $1,262 and $533, in 1993, 1992 and 1991, respectively. Earnings Per Share Earnings per share is based on the weighted average number of shares outstanding during each year. The exercise of all presently outstanding stock options and the issuance of shares under the "Employee Stock Purchase Plan" would have no dilutive effect on earnings per share. 20 23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) Statements of Cash Flows The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Supplemental Cash Flow Information Cash payments during the years ended 1993, 1992 and 1991 included interest of $4,510, $3,450 and $2,497, and income taxes of $4,112, $2,362 and $7,428, respectively. In 1991, the Company paid cash of $38,201, issued common stock of $2,200 and assumed liabilities of $30,808 to acquire assets with a fair value of $71,209. Financial Instruments and Concentrations of Credit Risk Off-Balance-Sheet Risk - The Company enters into forward foreign exchange and commodity contracts to hedge foreign currency and inventory purchases, respectively, when deemed appropriate for periods consistent with its committed exposures. The Company's foreign exchange and commodity contracts do not subject the Company to risk because gains and losses on contracts are offset by losses and gains on the assets, liabilities, and transactions being hedged. The foreign exchange contracts generally have maturities which do not exceed six months. Gains and losses on contracts which hedge specific foreign currency denominated commitments are deferred and recognized in the period in which the transaction is completed. As of December 31, 1993, the Company had $3.5 million of foreign exchange contracts outstanding. The Company had no outstanding foreign exchange contracts at December 31, 1992. Concentrations of Credit Risk - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit qualified financial institutions. The investment policy limits the Company's exposure to concentrations of credit risk. Except for major domestic automotive manufacturers, credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company's customer base, and its dispersion across many different industries and geographies. Sales to major domestic automotive manufacturers represent approximately 35% and 31% of total sales in 1993 and 1992, respectively. The Company's financial instruments include cash, accounts receivable and payable, notes payable and long-term debt at December 31, 1993. Cash, accounts receivable and payable are recorded at their net realizable value, which approximates market. Based on the borrowing rates currently available to the Company, Management believes the recorded value of notes payable and long-term debt approximates market. In the normal course of its business activities, the company is required under certain contracts to provide letters of credit which may be drawn down in the event the Company fails to perform under the contracts. At December 31, 1993, letters of credit outstanding amounted to $1,700. 2. ACQUISITIONS In August 1991, the Company acquired National Industries, Inc., a manufacturer of wire harnesses for the automotive industry, for $9,600 in cash, $28,601 repayment of debt and the issuance of 188,840 shares of the Company's common stock with a fair market value of $2,200. The acquisition has been accounted for by the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired, as adjusted in 1992, of $27,937, has been recorded as goodwill, and is being amortized over twenty-five years. The operating results of this acquisition are included in the Company's consolidated results of operations from the date of acquisition. Unaudited pro forma summary results of operations of the acquisition as if the acquisition had occurred at the beginning of 1991, after giving effect to certain adjustments, including amortization of goodwill, interest expense on the acquisition debt and related income tax effects, would have resulted in net sales of $345,522, a net loss of $27,405 and loss per share of $1.50. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what would have occurred had the acquisition been made as of those dates or of results which may occur in the future. 21 24 3. DEBT AND AVAILABLE CREDIT FACILITIES Long-term debt at December 31, 1993 and 1992, exclusive of current maturities, consisted of the following:
1993 1992 - ------------------------------------------------------------------------------------------------------------- Senior secured notes due 1995 - 1999 at interest rates ranging from 8.71% to 8.61% $40,000 $40,000 Revolving credit facility at interest rates ranging from 4.7% to 6.0% 9,000 Industrial development and pollution control revenue bonds at interest rates ranging from 5.7% to 7.5%, due 1995-2009 5,376 7,110 Capitalized lease obligations: Industrial development bonds due 1995-1996 at interest rates ranging from 70% to 75% of prime 421 829 ------- ------- Total $45,797 $56,939 ======= =======
Long-term borrowing maturities in each of the five years subsequent to December 31, 1994, are as follows: 1995, $10,866; 1996, $10,331; 1997, $8,900; 1998, $8,900 and 1999 and thereafter, $6,800. The industrial development and pollution control revenue bonds are collateralized by buildings and equipment with a net book value of approximately $10,850, of which $6,026 is guaranteed by a letter of credit at December 31, 1993. The capitalized lease obligations, which are financed by proceeds from bonds, are secured by the leased facilities which had a net book value of $1,413 at December 31, 1993. In 1992, the Company completed a private placement of $40,000 of senior secured notes. Interest is paid semiannually commencing August 1, 1992. The private placement senior secured note agreement includes certain financial covenants and restrictions upon dividends, investments, indebtedness, and the sale of certain assets. Dividends cannot exceed $9,800 plus 50% of net income annually. Aggregate short-term notes payable averaged $3,094, $15,917 and $19,000 during 1993, 1992 and 1991, respectively, and the weighted average interest rates on such borrowings were 6%, 6% and 8%. The maximum outstanding balances were $10,000, $49,000 and $49,000 in 1993, 1992 and 1991. Short-term debt was used principally for working capital needs, and in 1991 for an acquisition. In 1993, the Company increased its borrowing limit from $20 million up to $40 million under its secured revolving credit agreement with several banks. The agreement which expires no sooner than December 31, 1994 requires a commitment fee of one-half percent per annum, payable on any available and unused portion. At December 31, 1993 and 1992, the Company's borrowings under the revolving credit facility totaled $1.0 million and $12.9 million, respectively, which was borrowed for working capital purposes. Interest on the working capital borrowings are at prime rate (6% at December 31, 1993). 4. RESTRUCTURING COSTS Restructuring costs totaling $22,000 in 1991 include provisions for estimated costs from restructuring and cost-reduction programs. This provision includes costs associated with plant closings, discontinuance of selected older products, the write-off of related equipment and the write-down of facilities to net realizable value. The 1991 restructuring program has been substantially completed in 1993. The Company in connection with the acquisition of National Industries, Inc. in 1991 established a restructuring liability for estimated costs to reorganize National Industries' operations. This program has been substantially completed as of December 31, 1993. 22 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) 5. INCOME TAXES The geographic components of income (loss) before taxes on income were as follows:
1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------- United States $21,364 $6,456 $(23,978) Foreign 2,236 3,299 2,384 ------- ------ -------- Income (loss) before taxes on income $23,600 $9,755 $(21,594) ======= ====== ========
The components of the provision (credit) for taxes on income were as follows:
1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------- Current: United States $1,607 $ 189 $(1,858) Foreign 1,452 1,141 347 State 838 871 1,154 ------- ------ -------- Total current 3,897 2,201 (357) ------- ------ -------- Deferred: United States 3,611 (825) Foreign 492 968 1,650 ------- ------ -------- Total deferred 4,103 968 825 ------- ------ -------- Provision for taxes on income $8,000 $3,169 $ 468 ======= ====== ========
Deferred income taxes result from timing differences in the recognition of revenues and expenses for financial statement and income tax purposes. Included in the deferred amounts for 1993 are the benefits of operating losses and credits of $3,035 and a decrease in the valuation reserve of $513. A reconciliation of the Company's provision for taxes on income and the amount computed by applying the statutory federal income tax rate to income (loss) before taxes is as follows:
% Of Pretax Income (Loss) ----------------------------------------- 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------- Statutory federal tax rate 35.0 34.0 (34.0) State income taxes - net 2.3 5.9 3.5 Foreign income taxed at different rates, losses not tax benefitted, or earnings of foreign subsidiaries expected to be remitted 9.0 18.5 5.6 Net domestic losses (with) without tax benefit and tax credit carryovers (12.8) (33.0) 29.6 Effect of adoption of SFAS 96 (3.8) Non-deductible expenses .6 5.1 1.3 Other items - net (.2) 2.0 ------- ------ ------ Effective tax rate 33.9 32.5 2.2 ======= ====== ======
23 26 The components of the net deferred tax asset and liability as of December 31, 1993, were as follows:
Deferred Tax ----------------------------------------------- Current: Assets Liabilities Total ----------------------------------------------- Accrued liabilities $(3,883) $(3,883) Alternative minimum tax credit carryforwards (2,616) (2,616) Other liabilities $ 1,943 1,943 ------- ------- -------- Current deferred tax asset (6,499) 1,943 (4,556) ------- ------- -------- Non-current: Pension costs (2,293) (2,293) Operating loss carryfowards (6,665) (6,665) Foreign tax credit carryfowards (2,442) (2,442) Property, plant, and equipment 15,165 15,165 ------- ------- -------- Non-current deferred tax liability (11,400) 15,165 3,765 Valuation allowance 9,107 9,107 ------- ------- -------- Net non-current deferred tax liability $(2,293) $15,165 $12,872 ------- ------- --------
The accumulated earnings of foreign subsidiaries on which federal income taxes have not been provided amounted to $48,948 through December 31, 1993. The Company's intention is to permanently reinvest these earnings at least until such time as they can be repatriated without a material incremental tax cost. At December 31, 1993 the Company had foreign net operating losses amounting to approximately $20,792, of which $16,952 can be carried foward indefinitely and the balance expires at various dates through 1998. Additionally, there were available foreign tax credits of $2,442 that will expire at various dates through 1998 and alternative minimum tax credits of $2,616 which have indefinite carryover periods. 6. EMPLOYEE BENEFIT PLANS Pension Plans The Company sponsors noncontributory defined benefit pension plans that cover substantially all eligible U.S. employees. Benefits are based on employees' years of service and compensation during employment. The principal plan is funded on a current basis, in compliance with the requirements of the Employee Retirement Income Security Act. The Supplementary Employee Retirement Plan (SERP) is a non-qualified plan providing certain elected officers with additional defined pension benefits. Pension expense was $1,155, $875 and $964 in 1993, 1992 and 1991, respectively. The following table sets forth the plans' funded status and amounts recognized in the consolidated financial statements:
December 31, Defined Benefit Plan SERP ----------------------- ---------------------- 1993 1992 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------ Plans' funded status: Plan assets at fair value $13,954 $12,531 $ 6,152 $5,278 Projected benefit obligation: Vested 13,206 10,347 3,767 2,023 Nonvested 469 429 Effect of future compensation increases 5,075 3,360 448 468 ------ ------- ------ ----- Plan assets in excess of (less than) projected benefit obligation (4,796) (1,605) 1,937 2,787 Unrecognized net (gain) or loss 2,730 (1,055) 1,246 (408) Unrecognized net transition obligation (asset) being recognized over 15 years (1,834) (2,202) 1,371 1,501 ------ ------- ------ ----- Prepaid (accrued) pension liability $(3,900) $ (4,862) $4,554 $3,880 ------ ------- ------ ----- Pension cost - net: Service cost-benefits earned during year $ 1,349 $ 1,198 $ 261 $ 221 Interest cost on projected benefit obligation 1,195 1,067 261 218 Actual return on plan assets (932) (945) (108) (45) Net amortization and deferral (694) (659) (177) (180) ------ ------- ------ ----- Pension cost - net $ 918 $ 661 $ 237 $ 214 ------ ------- ------ -----
24 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data)
1993 1992 - ------------------------------------------------------------------------------------------------------------ Actuarial assumptions: Discount rate 7.5% 8.5% Long-term rate of compensation increases 5.0% 5.0% Long-term rate of return on plan assets 8.5% 9.0%
The Company's foreign defined contribution pension plans are consistent with local practice and are principally funded through insurance programs. Pension expense in 1993, 1992 and 1991, for the foreign plans was $800, $857 and $914, respectively. Savings and Retirement Plan The Company, in 1988, adopted the Augat Inc. Savings and Retirement Plan and established a related trust. The Plan covers substantially all eligible U.S. employees and allows employees to contribute from one to ten percent of salary through salary reduction, up to the Internal Revenue Service limit on salary reduction contributions. The Company will make matching contributions of 25% of the employees' contributions of up to 6% of salary in the form of Company common stock. Company contributions will vest 20% after two years of service (with prior service vesting allowed for active employees at the inception of the Plan), increasing by 20% per year up to 100% after six years of service. The Plan will permit participants to elect to invest their contributions in one or more of three savings and investment funds. For the years 1993, 1992 and 1991, the Company contributed 17,390, 19,820 and 17,984 shares, respectively, of Company common stock to the Plan at a cost of $245, $215 and $224, respectively. 7. COMMITMENTS AND CONTINGENCIES Operating Leases The Company and its subsidiaries are obligated under facility and equipment leases which expire at various dates through 2002. These leases generally provide extension privileges and are exclusive of real estate taxes, insurance and other expenses. Rent expense in 1993, 1992 and 1991 was $6,765, $5,720 and $3,613, respectively. Annual minimum future rentals are $5,686, $3,971, $2,451, $1,554 and $1,075 for the years 1994 through 1998, and aggregate to $2,115 for all the years subsequent to 1998. Contingencies The acquisition of National Industries, Inc. included a liability of approximately $5,400 to cover the estimated costs of site remediation for certain National facilities. Management estimated the liability using third-party consultants. Costs incurred as of December 31, 1993 (approximately $700) represent amounts expended for preliminary site evaluation and design and testing. The Company is in the process of discussing with governmental agencies the procedures necessary to complete additional studies and remediation. The Company believes the recorded liability of approximately $4,700 at December 31, 1993 to be adequate. 8. COMMON STOCK In 1988, the Company's Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Pursuant to the Plan, the Rights become exercisable when certain triggering events occur that involve an entity's attempt to acquire, or the acquisition of, at least 20 percent of the Company's Common Stock or announces a tender or exchange offer that would result in such entity owning 30 percent or more of the Company's Common Stock. Such percentages may, at the Board's discretion, be lowered. If any entity becomes the beneficial owner of 25 percent or more of the Common Stock (except pursuant to a tender or exchange offer for all shares at a fair price as determined by the independent members of the Board), if a 20 percent or more shareholder consolidates or merges into or engages in certain self-dealing transactions with the Company, or if there occurs any reclassification, merger, or other transaction or transactions which increases by more than one percent of the proportionate share of the Company's outstanding Common Stock held by a 20 percent or more shareholder, then each holder of a Right will be entitled to purchase that number of shares of the Company's Common Stock which equals the exercise price of the Right divided by one-half of the current market price of such Common Stock at the date of the occurrence of the event. In addition, if the Company is involved in a merger or other business combination transaction with another entity in which it is not the surviving corporation or in connection with which its Common Stock is changed or converted, or it sells or transfers 50 percent or more of its assets or earning power to another entity, each Right that has not previously been exercised will entitle its holder to purchase the number of shares of common stock of such other person which equals the exercise price of the Right divided by one-half of the current market price of such Common Stock at the date of the occurrence of the event. The Company will generally be entitled to redeem the Rights at $.02 per Right 25 28 at any time until the tenth day following a public announcement that a 20 percent stock position has been acquired and in certain other circumstances. The Rights will expire on August 23, 1998, unless earlier redeemed or exchanged. 9. STOCK OPTION AND STOCK PURCHASE PLANS Stock Options, Appreciation Rights and Restricted Stock The Company has three Stock Option and Appreciation Rights Plans, the 1984, the 1987 and the 1989 Plans, pursuant to which stock options and appreciation rights have been granted and will be granted in the future. In addition, restricted stock awards may be granted under the 1989 Plan. All Plans provide for the issuance of stock options and tandem appreciation rights to key employees of the Company and, in the case of the 1987 and 1989 Plans only, also to directors of the Company. The options may be either incentive stock options or non-qualified options. No more than a total of 2,100,000 shares of common stock may be issued under all of the Plans. The period over which options must be exercised is determined on the date of grant and may not be later than 10 years or 10 years and 30 days in the case of incentive and non-qualified options, respectively. Under the Plans, incentive stock options will be granted at fair market value as of the date of grant and may not be exercised until 12 months after the date of grant. Non-qualified options must equal at least 90% of the fair market value on the date of grant. Stock appreciation rights may also be granted to holders of options. Under exercise of such rights, the holder will receive shares of common stock or a combination of cash and common stock at the election of the Board of Directors equal to the increase in the fair market value of the number of shares of common stock subject to such rights. Under the Plan, when both an option and an appreciation right are granted, the exercise of one cancels the other. Restricted stock awards may be issued under the 1989 Plan and entitle the participant to purchase common stock from the Company under terms which provide for vesting over a specified number of years and a right of repurchase by the Company of non-vested stock when the recipient's relationship with the Company terminates. The price of the awards may be less than fair market value but not less than par value ($.10 per share). Compensation expense resulting from the grant of awards is recognized over the period from the award date to the date the forfeiture provisions lapse. Stock awards amounting to 26,500 shares were issued in 1993 and 10,500 shares were issued in 1992. Shares repurchased totaled 4,500 and 5,000 in 1992 and 1991, respectively, and none in 1993. The net cost of shares outstanding in 1993 was $169. The Compensation Committee of the Board of Directors administers all of the Plans. A summary of options under the Plans is as follows:
Number of Shares Option Price Per Share - -------------------------------------------------------------------------------------------------------------- Outstanding, December 31, 1990 1,564,164 Granted 419,000 $ .10-12.75 Exercised (40,290) .10-12.63 Cancelled or expired (424,688) 9.38-24.50 --------- ----------- Outstanding, December 31, 1991 1,518,186 Granted 481,000 .10-11.75 Exercised (40,317) .10-10.88 Cancelled or expired (227,078) 9.38-23.25 --------- ----------- Outstanding, December 31, 1992 1,731,791 Granted 328,525 .10-16.88 Exercised (567,935) .10-14.50 Cancelled or expired (254,293) 9.38-15.00 --------- ----------- Outstanding, December 31, 1993 1,238,088 --------- Options exercisable at December 31, 1993 372,163 $9.38-12.63 --------- ----------- Options available for future grant at December 31, 1993 182,008 ---------
Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan which allows employees to purchase shares of common stock of the Company at a 15% discount from market value (subject to a minimum price and a maximum contribution per employee) pursuant to annual offerings. The maximum number of shares available for issuance under the current plan is 600,000 shares over a five-year period ending in 1997. Employees purchased 25,818, 5,380 and 22,810 shares in 1993, 1992 and 1991, respectively. 26 29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) 10. BUSINESS SEGMENT AND FOREIGN OPERATIONS The Company operates within a single segment of the electronics industry defined as the electromechanical component and subsystem sector. The Company designs, manufactures and markets a broad range of electromechanical components and subsystems. The sales and marketing operations outside the United States are conducted through marketing/warehousing subsidiaries in Australia, Canada, France, Germany, Italy, Japan, Singapore, Sweden, Switzerland, the United Kingdom and sales offices in other areas. The foreign manufacturing operations are in Mexico, Singapore, Switzerland and the United Kingdom. The products manufactured in Switzerland are sold to the parent company for further processing or to the foreign marketing/warehousing subsidiaries for further finishing or resale in local markets. Financial information concerning the Company's operations by major geographical area is as follows:
1993 1992 1991 - ----------------------------------------------------------------------------------------------------------- Net Sales: United States Sales excluding export sales $331,200 $269,603 $202,518 Export sales 9,181 9,304 4,684 Intersegment sales 18,464 18,914 15,265 -------- -------- -------- Total 358,845 297,821 222,467 ======== ======== ======== Western Europe: Sales excluding export sales 44,979 55,914 51,541 Export sales 1,282 1,079 161 Intersegment sales 5,301 5,853 5,435 -------- -------- -------- Total 51,562 62,846 57,137 ======== ======== ======== Other Areas: Sales excluding export sales 33,621 25,818 22,698 Export sales Intersegment sales 3,942 984 1,737 -------- -------- -------- Total 37,563 26,802 24,435 ======== ======== ======== Total 447,970 387,469 304,039 Less eliminations 27,707 25,751 22,437 -------- -------- -------- Total $420,263 $361,718 $281,602 ======== ======== ======== Operating Income: United States $ 37,740 $ 17,036 $ 2,320 Western Europe (135) 4,309 7,265 Other Areas 771 (1,596) (1,773) -------- -------- -------- Total $ 38,376 $ 19,749 $ 7,812 ======== ======== ======== Identifiable Assets: United States $230,322 $211,087 $208,683 Western Europe 58,027 62,757 64,831 Other Areas 29,511 21,604 19,715 -------- -------- -------- Total $317,860 $295,448 $293,229 ======== ======== ========
Operating income by geographical area does not include corporate expenses, restructuring costs, other income or expenses, or income taxes. Intersegment sales between areas are made at negotiated selling prices. One customer accounted for approximately 28% and 24% of sales for 1993 and 1992, respectively. 27 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
(In thousands) --------------------------------------------------- Net Earnings Net Gross Income (Loss) 1993 Sales Margin (Loss) Per Share 1st Quarter $101,155 $21,545 $ 2,900 $ .16 2nd Quarter 106,295 23,313 3,600 .19 3rd Quarter 100,014 22,421 4,100 .22 4th Quarter 112,799 24,020 5,000 .26 -------- ------- --------- ------- $420,263 $91,299 $ 15,600 $ .83 1992 1st Quarter $ 84,587 $16,916 $ 1,400 $ .08 2nd Quarter 90,234 18,609 2,193 .12 3rd Quarter 91,422 18,879 1,703 .09 4th Quarter 95,475 19,790 1,290 .07 -------- ------- --------- ------- $361,718 $74,194 $ 6,586 $ .36 1991 1st Quarter $ 63,121 $15,280 $ 1,183 $ .07 2nd Quarter 64,846 15,875 758 .04 3rd Quarter* 70,015 15,812 (20,531) (1.13) 4th Quarter 83,620 15,277 (3,472) (.19) -------- ------- --------- ------- $281,602 $62,244 $(22,062) $(1.21) * Includes before tax restructuring costs of $22,000 in 1991.
28 31 SCHEDULE V AUGAT INC. AND SUBSIDIARIES --------------------------- PROPERTY, PLANT, AND EQUIPMENT
For the Years Ended December 31, 1993, 1992 and 1991 (In thousands) - ------------------------------------------------------------------------------------------------------------------- Balance At Retire- Balance Beginning Additions ments Other Translation At End Description of Year At Cost Or Sales Changes Adjustments Of Year (1) (2) - ------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 1993: Land $ 4,204 $ $ $( 616) $( 60) $ 3,528 Buildings and building improvements 56,830 35 27 ( 1,353) ( 811) 54,674 Machinery and equipment 105,931 947 3,240 12,083 ( 566) 115,155 Furniture and fixtures 19,781 340 978 1,643 ( 183) 20,603 Construction in progress 6,942 19,055 (15,938) ( 49) 10,010 -------- ------- ------ --------- -------- -------- TOTAL $193,688 $20,377 $4,245 $( 4,181) $(1,669) $203,970 -------- ------- ------ --------- -------- -------- Year Ended December 31, 1992: Land $ 4,410 $ $ $( 113) $( 93) $ 4,204 Buildings and building improvements 58,745 1,309 302 ( 2,365) ( 557) 56,830 Machinery and equipment 102,970 1,264 2,484 4,361 ( 180) 105,931 Furniture and fixtures 17,772 1,801 580 943 ( 155) 19,781 Construction in progress 6,365 10,121 796 ( 8,706) ( 42) 6,942 -------- ------- ------- --------- -------- -------- TOTAL $190,262 $14,495 $4,162 $( 5,880) $(1,027) $193,688 -------- ------- ------- --------- -------- -------- Year Ended December 31, 1991: Land $ 3,925 $ 305 $ 191 $ 569 $( 198) $ 4,410 Buildings and building improvements 54,500 642 687 6,912 (2,622) 58,745 Machinery and equipment 109,274 1,552 2,224 ( 3,604) (2,028) 102,970 Furniture and fixtures 14,626 1,589 114 2,006 ( 335) 17,772 Construction in progress 10,374 10,152 827 (13,000) ( 334) 6,365 -------- ------- ------ --------- -------- -------- TOTAL $192,699 $14,240 $4,043 $( 7,117) $(5,517) $190,262 -------- ------- ------ --------- -------- -------- - ------------------------------------------------------------------------------------------------------------------ NOTES: 1993 1992 1991 ---- ---- ---- 1.a. Includes assets written off as part of restructuring. $(3,914) $(20,266) b. Includes assets acquired in purchase transactions. See note 2 to the consolidated financial statements. 13,943 c. Includes assets which have been reclassified to or from Property held for sale. $(4,181) (1,966) (794) See note 4 to the consolidated financial statements. ------- ------- -------- TOTAL $(4,181) $(5,880) $( 7,117) d. Includes reclassifications made between categories. ======= ======= ======== 2. Amounts represent the effect of Financial Accounting Standards Board Statement No. 52, "Foreign Currency Translation".
29 32 SCHEDULE VI AUGAT INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT For the Years Ended December 31, 1993, 1992 and 1991 (In thousands)
- --------------------------------------------------------------------------------------------------------- ADDITIONS BALANCE AT CHARGED TO TRANSLATION BALANCE BEGINNING COSTS AND OTHER ADJUSTMENTS AT END DESCRIPTION OF YEAR EXPENSES RETIREMENTS CHANGES (1) (2) OF YEAR - --------------------------------------------------------------------------------------------------------- Year Ended December 31, 1993: Buildings and building improvements $15,231 $ 1,908 $ 22 $(1,147) $( 197) $ 15,773 Machinery and equipment 68,334 9,856 2,995 ( 3) ( 452) 74,740 Furniture and fixtures 11,861 2,702 919 ( 34) ( 152) 13,458 ----------------------------------------------------------------------- TOTAL $95,426 $14,466 $3,936 $(1,184) $( 801) $103,971 ----------------------------------------------------------------------- Year Ended December 31, 1992: Buildings and building improvements $14,191 $ 2,205 $ 279 $( 861) $( 25) $ 15,231 Machinery and equipment 64,350 9,865 1,939 (3,805) ( 137) 68,334 Furniture and fixtures 9,926 2,622 325 ( 251) ( 111) 11,861 ----------------------------------------------------------------------- TOTAL $88,467 $14,692 $2,543 $(4,917) $( 273) $ 95,426 ----------------------------------------------------------------------- Year Ended December 31, 1991: Buildings and building improvements $13,796 $ 2,134 $ 223 $(1,002) $( 514) $ 14,191 Machinery and equipment 65,430 10,920 1,719 (8,872) (1,409) 64,350 Furniture and fixtures 8,005 2,244 75 ( 50) ( 198) 9,926 ----------------------------------------------------------------------- TOTAL $87,231 $15,298 $2,017 $(9,924) $(2,121) $ 88,467 ----------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- NOTES: 1993 1992 1991 -------- -------- -------- 1a. Includes amounts written off as part of restructuring. $(3,914) $(8,922) b. Includes amounts acquired in purchase transactions. See note 2 to the consolidated financial statements. c. Includes amounts which have been reclassified to Property held for sale. $(1,184) (1,003) (1,002) See note 4 to the consolidated financial -------- -------- -------- statements. Total $(1,184) $(4,917) $(9,924) d. Includes reclassification made between ======= ======= ======= categories 2. Amounts represent the effect of Financial Accounting Standards Board Statement No. 52 "Foreign Currency Translation".
30 33 SCHEDULE VIII AUGAT INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 1993, 1992 and 1991 (In thousands)
- --------------------------------------------------------------------------------------------------------------------- ADDITIONS -------------------- CHARGED CHARGED BALANCE AT TO COSTS TO OTHER BALANCE BEGINNING AND ACCOUNTS DEDUCTIONS - AT END DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR - --------------------------------------------------------------------------------------------------------------------- 1993 - ---- VALUATION ACCOUNTS DEDUCTED FROM ASSETS TO WHICH THEY APPLY - - - Allowance for doubtful accounts $1,451 $272 Bad Debts $594 (1) $1,129 - - Reserve for assets held for resale $600 $ 600 ------------------------ ---------------------------- 1992 - ---- VALUATION ACCOUNTS DEDUCTED FROM ASSETS TO WHICH THEY APPLY - - - Allowance for doubtful accounts $1,479 $514 Bad Debts $542 (1) $1,451 ------------------------ ------------------------------ 1991 - ---- VALUATION ACCOUNTS DEDUCTED FROM ASSETS TO WHICH THEY APPLY - - - Allowance for doubtful accounts $1,832 $302 $236 (2) Bad Debts $891 (1) $1,479 ------------------------ ----------------------------- - --------------------------------------------------------------------------------------------------------------------- Note 1. Amount is net of recoveries. Note 2. Amount acquired in purchase transaction. See note 2 to the consolidated financial statements.
31 34 AUGAT INC. SCHEDULE IX - SHORT-TERM BORROWINGS For the Years Ended December 31, 1993, 1992 and 1991 (Thousands, except interest rates)
(3) (3) Weighted Weighted Average average interest Maximum amount interest (2) rate at amount outstanding rate (1) Balance at end of outstanding during during Classification end of year year during year year year - -------------- ----------- ------- ------------ ---------- -------- 1993 - ---- Lines of credit $ 1,000 6.0% $10,000 $ 3,094 6.0% 1992 - ---- Lines of credit $12,900 6.0% $49,000 $15,917 6.0% 1991 - ---- Lines of credit $49,000 6.6% $49,000 $19,000 8.0% (1) U.S. dollar bank borrowings represent variable rate borrowings under the Company's $40,000 credit agreement in 1993 and the Company's former $20,000 and $10,000 credit agreements in 1992 and 1991, respectively. In 1992 and 1991, borrowings also include bridge loan financing totaling $45,000 obtained in connection with the acquisition of National Industries Inc. (2) Reflects balance of borrowings under the credit agreement, short- term, fixed rate loan prior to reclassification of such borrowings (or a portion of such borrowings) to long-term debt based on the Company's intention to refinance these notes on a long-term basis and the ability, if necessary, to refinance these notes under the credit agreement. At the end of 1992 and 1991, $9,000 and $40,000 of such borrowings were reclassified to long-term debt. (3) The computation of average amounts outstanding and weighted average interest rates during the year are based on daily balances and interest rates for U.S dollar borrowings.
32 35 SCHEDULE X AUGAT INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (In thousands)
- ----------------------------------------------------------------------------------------------------------- CHARGED TO COSTS AND EXPENSES ----------------------------------- ITEM 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------ Maintenance and Repairs $4,137 $4,335 $3,724 ------ ------ ------ Advertising Costs $1,413 $2,090 $2,355 ------ ------ ------ Information not listed herein is omitted because of the absence of the conditions under which it is required. - ------------------------------------------------------------------------------------------------------------
33 36 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ------------------------------------------------------------------------ Not Applicable. The balance of this page intentionally left blank. 34 37 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item concerning directors is incorporated herein by reference pursuant to Rule 12b-23 to the Company's Proxy Statement dated March 24, 1994 with respect to the Annual Meeting of Shareholders to be held April 26, 1994. The following table sets forth the names of all executive officers of the Company and certain other information relating to the positions held by them with the Company and other business experience.
Business Experience Executive Officer Age Position For the Past Five Years - ----------------- --- -------- ----------------------- Marcel P. Joseph 58 Chief Executive Chairman of the Board Officer, President of Directors since and Chairman of February, 1989. the Board President and Chief Executive Officer since February, 1988. Served as Executive Vice President and President and Chief Operating Officer with Communications Satellite Corporation, from April, 1985 to February, 1988. For twenty-four of the previous twenty-six years he was with General Electric Company serving in various management positions, the last being as Vice Presi- dent and General Manager of the Trans- portation Products Division. Anthony F. Lefkowicz 56 Vice President Vice President, Auto- and General motive Business since Manager, Augat September 1991. From Automotive February 1991 to Business September 1991 he was Vice President of Manufacturing Opera- tions. Previously he was Vice President and General Manager, Auto- motive Division from May 1988 to February 1991. For twenty- seven years he held
35 38 various management positions with General Electric Company, with the last being General Manager - Product Support Operation, Lighting Products Division. Richard J. Eaton 57 Vice President - Vice President, Human Human Resources Resources since June, 1984. For the eleven preceding years he held various manage- ment positions with Itek Corporation, with the latest being Vice President Employee Relations for Itek Systems and Communi- cations Industries. Daniel J. Maher, Jr. 47 Corporate Controller Corporate Controller since 1979. John E. Lynch, Jr. 50 Treasurer Treasurer since January, 1985; Assistant Treasurer from 1983 to 1985; from August, 1979 to December, 1982 Tax Manager. Larry E. Buffington 46 Vice President and Vice President and General Manager, General Manager, Communications Communications Pro- Products Business ducts Business since August 1991. Pre- viously he was Chair- man of the Board and Chief Executive Officer of Adaptive Technologies, Inc. from 1989 to 1991. From 1988 to 1989 he served as Vice President and General Manager, Cook Division of Northern Telcom. He was with AMP, Inc. for 19 years serving in various management positions with the last being General Manager, Signal Trans- mission Systems Division.
36 39 L. Ronald Hoover 53 Vice President and Vice President and General Manager, General Manager, Interconnection Interconnection Pro- Products Business ducts Business since December 1991. Pre- viously, he was Managing Director and Chief Operating Officer of Diceon Electronics, Inc. from 1989 to 1991. From 1979 to 1989 he served AMP, Inc. in various Management positions with the last being Group Vice President, Signal Transmission Products. Gasper Buffa 41 Vice President and Vice President and General Manager, General Manager, Auto- Components Division motive Components Division since January, 1994. From August 1992 to January 1994 he was Vice Pre- sident, Engineering, Sales & Marketing for the Wiring Systems and Components Division. Previously, from September 1991 to August 1992 he was Vice President & General Manager, Com- ponents Division and from February 1991 to September 1, 1991 he was Vice President, Manufacturing Opera- tions for the Auto- motive and Communica- tions Division. From March of 1989 to February 1, 1991 he was Vice President Operations for the Automotive Division. He served the General Electric Company from 1974 to 1989 in various management positions with the last being Plant Manager, Carolina Products Plant. James E. Finley 40 Vice President and Vice President and General Manager, General Manager Augat Augat Europe Europe since March 1992. Previously Vice President and General Manager, European Automotive Division from August 1991 to March 1992. From February to August 1991, Vice President and General Manager, Automotive Division. From March 1989 to February 1991 was Vice President, Sales and Marketing, Automotive Division.
37 40 From 1986 to 1989 he served as General Marketing Manager with Interconnect Products Operation, GTE Pro- ducts Corporation. From 1978 to 1986 he served in various management positions with AMP, Inc. Ellen B. Richstone 42 Vice President and Vice President and Chief Financial Chief Financial Officer Officer since Novem- ber, 1992. From March 1992 to October 1992 she was Senior Vice President and Chief Financial Officer of Rohr, Inc. Prior to that, she was Execu- tive Vice President and Chief Financial Officer of Bull H.N. Worldwide Information Systems from 1989 to 1992. From 1981 to 1989, she served in various positions at Data General Corpora- tion, the most recent being Vice President and Corporate Treasurer. Steven M. Abelman * 43 Vice President and Vice President and General Manager, General Manager, Auto- Wiring Systems motive Wiring Systems Division Division since January 1994. Previously, he was Vice President Operations, Wiring Systems and Components Division from August 1992 to January 1994 and Vice President Manufacturing, Wiring Systems from March 1992 to August 1992. From December 1991 to March 1992 he was Vice President U.S. Opera- tions, Wiring Systems. From 1990 to 1991 he was Vice President Connector Operations for TriStar Inc. and from 1985 to 1990 was Director of Operations for the Components Division of I.T.T. Cannon.
The executive officers of the Company are elected annually. * Effective, February, 1994 38 41 ITEMS 11 AND 12 - EXECUTIVE COMPENSATION AND SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------ The information required by these items is incorporated herein by reference pursuant to Rule 12b-23 to the Company's Proxy Statement dated March 24, 1994 for the Annual Meeting of Shareholders to be held April 26, 1994. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- Not applicable. The balance of this page intentionally left blank. 39 42 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - ---------------------------------------------------------------- (a) 1. Financial Statements The Financial Statements listed below appear in Part II, Item 8 hereof. Financial Statements: --------------------- Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (a) 2. Financial Statement Schedules ----------------------------- The Financial Statement Schedules listed below appear in Part II, Item 8 hereof. Schedule V - Property, Plant and Equipment Schedule VI - Accumulated Depreciation, and Amortization of Property, Plant and Equipment Schedule VIII- Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings Schedule X - Supplementary Income Statement Information Schedules not included with this additional financial data have been omitted because of the absence of conditions under which they are required or because the required financial information is included in the financial statements submitted. (a) 3. Exhibits -------- (3) Articles of Incorporation and By-Laws (a) Restated Articles of Organization, as amended. Incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (b) By-Laws, as amended. Incorporated by reference to Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987. (4) Instruments Defining the Rights of Security Holders, Including Indentures (a) Specimen certificate representing shares of the Registrant's $.10 par value common stock. Incorporated by reference to Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988. 40 43 (b) Trust Indenture dated as of August 2, 1988 between Augat Inc. and The Chase Manhattan Bank, N.A. as Trustee. Incorporated by reference to Exhibit 2 of the Registrant's Registration Statement on Form 8-A dated August 2, 1988. (10) Material Contracts (a) 1994 Stock Plan (Exhibit 10(a)). (b) 1984 Stock Option and Appreciation Right Plan. Incorporated by reference to Exhibit A to the Proxy Statement dated March 12, 1984 for the Annual Meeting of the Registrant's Shareholders on April 24, 1984. (c) 1987 Stock Option and Appreciation Right Plan. Incorp- orated by reference to Exhibit A to the Registrant's Proxy Statement dated March 25, 1987 for the Annual Meeting of the Registrant's Shareholders held on April 28, 1987. (d) 1989 Stock Plan. Incorporated by reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (e) Supplementary Employee Retirement Plan. Incorporated by reference to Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986. (f) Letter of Credit and Reimbursement Agreement among Chemical Bank as Letter of Credit Issuer, Altair International, Inc. as Borrower and Augat Inc. as Guarantor dated as of December 1, 1986. Incorporated by reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1986. (g) Employment Agreement dated January 3, 1991 between the Registrant and Marcel P. Joseph. Incorporated by reference to Exhibit 10(g) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. (h) Augat Inc. Savings and Retirement Plan. Incorporated by reference to Exhibit 10(h) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988. (i) Rights Agreement dated as of August 2, 1988 between Augat Inc. and The Chase Manhattan Bank, N.A., Rights Agent. Incorporated by reference to Exhibit 1 of the Registrant's Registration Statement on Form 8-A dated August 2, 1988. (j) Severance Agreements. Incorporated by reference to Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (k) Deferred Compensation Plan. Incorporated by reference to Exhibit 10(1) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. 41 44 (l) Supplemental Disability Income Plan. Incorporated by reference to Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (m) Supplemental Survivor Benefit Plan. Incorporated by reference to Exhibit 10(n) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. (n) Agreement of Merger among Augat Inc., National Industries, Inc. and June M. Collier dated August 30, 1991. Incorporated by reference to Exhibit 2 to the Registrants' Form 8-K filed September 16, 1991. (p) Note Agreement between Augat Inc., as Borrower and Principal Mutual Life Insurance Company and Allstate Life Insurance Company, as Lenders, dated as of February 1, 1992. Incorporated by reference to Exhibit 10(p) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. (q) Revolving Credit Agreement among Augat Inc., Augat Wiring Systems Inc., Augat Automotive Inc., Augat Communications Group Inc., LRC Electronics Inc., Reed Devices Inc., The First National Bank of Boston, Shawmut Bank, N.A., Chemical Bank and The First National Bank of Boston, as agent, dated as of September 14, 1992. Incorporated by reference to the Exhibit (10.1) to the prospectus included in Registration Statement No. 33- 53600 dated December 2, 1992. (r) 1993 Employee Stock Purchase Plan. Incorporated by reference to Exhibit 10(r) to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (s) Amendment No. 3 to the Revolving Credit Agreement among Augat Inc., Augat Wiring Systems Inc., Augat Automotive Inc., Augat Communication Products Inc., LRC Electronics Inc., Reed Devices Inc., The First National Bank of Boston, Shawmut Bank, N.A., Chemical Bank and The First National Bank of Boston, as agent, dated as of July 9, 1993. (21) Subsidiaries of the Registrant. Exhibit 21. (23) Independent Auditors' Consent. Exhibit 23. (b) Reports on Form 8-K. -------------------- No reports on Form 8-K were filed with the Commission during the last quarter of calendar year 1993. 42 45 SIGNATURES Pursuant to the requirement 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 of the undersigned thereunto duly authorized. (Registrant) AUGAT INC. --------------------------------------------------------- By /s/ MARCEL P. JOSEPH By /s/ ELLEN B. RICHSTONE --------------------------- --------------------------- Marcel P. Joseph Ellen B. Richstone Chairman of the Board, Vice President & Title Chief Executive Officer Title Chief Financial Officer ----------------------- ----------------------- & President ----------- Date March 24, 1994 -------------------- 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 date indicated. /s/ MARCEL P. JOSEPH - ------------------------------- ------------------------------- Marcel P. Joseph, Director Thomas L. King, Director (Date) March 24, 1994 (Date) March , 1994 ------------------------- ------------------------- /s/ VERNON R. ALDEN /s/ JOHN N. LEMASTERS - ------------------------------- ------------------------------- Vernon R. Alden, Director John N. Lemasters, Director (Date) March 24, 1994 (Date) March 24, 1994 ------------------------- ------------------------- /s/ DAVID V. RAGONE - ------------------------------- ------------------------------- Bruce L. Crockett, Director David V. Ragone, Director (Date) March , 1994 (Date) March 24, 1994 ------------------------- ------------------------- /s/ ALAN J. ZAKON - ------------------------------- ------------------------------- John D. Curtin, Jr., Director Alan J. Zakon, Director (Date) March , 1994 (Date) March 24, 1994 ------------------------- ------------------------- - ------------------------------- ------------------------------- Samuel S. Dennis 3d, Director Norton Q. Sloan, Director (Date) March , 1994 (Date) March , 1994 ------------------------- ------------------------- /s/ JERALD G. FISHMAN - ------------------------------- Jerald G. Fishman, Director (Date) March 24, 1994 -------------------------
43 EX-10.A 2 1994 STOCK PLAN 1 EXHIBIT 10(a) AUGAT INC. 1994 STOCK PLAN FEBRUARY 15, 1994 1. PURPOSE. The purpose of this plan (the "Plan") is to secure for Augat Inc. (the "Company") and its shareholders the benefits arising from capital stock ownership by employees, officers and directors of the Company and its parent (if any) and subsidiary corporations who are expected to contribute to the Company's future growth and success. 2. OPTIONS, AWARDS, AND ADMINISTRATION. (a) Options and Awards. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company and may be either incentive stock options ("Incentive Stock Options") meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or nonstatutory options which are not intended to meet the requirements of Section 422. Awards granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company and shall meet the requirements of Section 5 of the Plan. (b) Administration. The Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. The Compensation Committee of the Board of Directors, constituted in accordance with Section 2(d), below (the "Committee") may in its sole discretion (i) make awards for the purchase of shares of the Company's Common Stock, $.10 par value per share ("Common Stock"), pursuant to Section 5, (ii) grant options to purchase shares of the Company's Common Stock, pursuant to Section 6, and (iii) issue shares upon exercise of options as provided in the Plan. The Committee shall have authority, subject to the express provisions of the Plan, to construe the respective awards, option agreements, and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective awards and option agreements, which need not be identical, and to make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any award or option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director or person acting pursuant to authority delegated by the Board of Directors shall be liable for any action or determination made in good faith. (c) Applicability of Rule 16b-3. Those provisions of the Plan which make explicit reference to Rule 16b-3 shall apply only to such persons as are required to file reports under Section 16(a) of the Exchange Act (a "Reporting Person"). (d) Grants to Officers and Directors. The selection of a director or an officer (as the terms "director" and "officer" are defined for purposes of Rule 16b-3) as a recipient of an award or stock option, the selection of an employee as a recipient of an award or stock option, the timing of a grant of an option or award, the exercise or purchase price related to the same and the number of shares subject to the option or award, or any conditions or waivers thereof shall be determined by the Committee, which shall consist of two or more directors, each of whom shall be a "disinterested person"; provided, however, that each non-employee director shall be granted "Mandated Options" (as hereinafter defined) pursuant to the provisions set forth below and shall not be eligible to receive any other options hereunder. No nonemployee director shall be eligible to receive a restricted stock award under the Plan. For the purposes of the Plan, a director shall be deemed to be "disinterested" only if such person (i) qualifies as a "disinterested person" within the meaning of paragraph A-1 2 (d)(3) of Rule 16b-3 of the Exchange Act (or any successor rule), as such term is interpreted from time to time and (ii) on or after the first meeting of shareholders at which Directors are to be elected that occurs after July 1, 1994, qualifies as an "outside director" for purposes of Section 162(m) of the Code. The term "Mandated Options" shall mean options to purchase 5,000 shares of Common Stock, subject to adjustment as provided in Section 10, below, which shall be granted, beginning in 1994, to each non-employee director on the date he or she is elected or re-elected to the Board of Directors. Mandated Options shall (a) be exercisable on a cumulative basis in installments of 1,250 shares per year, commencing one year from the date of grant, (b) have a purchase price per share of 100% of the fair market value of such stock, as determined by the Board of Directors, at the time of grant of such option and (c) expire five years from the date of grant. Notwithstanding the foregoing, if a nonemployee director is granted an option in connection with his or her election or re-election to the Board of Directors under any other stock option plan adopted by the Company, the number of shares of Common Stock for which a Mandated Option under this Plan is exercisable shall be reduced, share for share, by the number of shares for which any such option is granted under such other plans. 3. ELIGIBILITY. Options and awards may be granted or made to persons who are, at the time of grant or award, officers, employees or directors of the Company or any Parent Corporation or Subsidiary (as those terms are defined in Section 14 hereof); provided that Incentive Stock Options shall be granted only to employees of the Company. No person shall be granted any Incentive Stock Option under the Plan who, at the time such option is granted, owns, directly or indirectly, capital stock of the Company possessing more than 10% of the total combined voting power of all classes of stock of the Company, unless the requirements of subparagraph (g)(ii) of Section 6 are satisfied. The attribution of stock ownership provisions of Section 424(d) of the Code, and any successor provisions thereto, shall be applied in determining the shares of stock owned by a person for purposes of applying the foregoing percentage limitation. A person who has been granted an option or award may, if he or she is otherwise eligible, be granted additional options or awards if the Committee shall so determine. 4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided in Section 9 below, the maximum number of shares of Common Stock of the Company which may be issued and sold under the Plan is 750,000 shares and the number of shares of Common Stock of the Company for which options or restricted stock awards may be awarded in any calendar year, in the aggregate, shall not exceed 70,000 shares for the Chief Executive Officer or 30,000 shares for any other individual. Such shares may be authorized and unissued shares or may be shares issued and thereafter acquired by the Company. Any shares of Common Stock subject to an award which are not purchased by the recipient of the award, or which are purchased by the recipient of the award but later repurchased by the Company in accordance with the terms of the award or the Plan, shall again be available for purposes of the Plan. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for purposes of the Plan. 5. AWARDS. A restricted stock award ("award") shall consist of the sale and issuance by the Company of shares of Common Stock, and purchase by the recipient of such shares, subject to the terms, conditions and restrictions described in the document evidencing the award and in this Section 5 and elsewhere in the Plan. (a) Execution of Restricted Stock Award. As a condition to an award under the Plan, each recipient of an award shall execute an agreement substantially in the form set forth as Exhibit A to the Plan or in such A-2 3 other form, which may differ among recipients, as shall be specified by the Board of Directors at the time of such award. (b) Price. The Board of Directors shall determine the price (which shall be not less than the par value of Common Stock) at which shares of Common Stock shall be sold to recipients of awards under the Plan. The Board of Directors may, in its discretion, sell and issue shares pursuant to awards at a purchase price below the then fair market value of the Common Stock, provided that the price shall not be less than the par value of the Common Stock on the date of grant. The purchase price shall be paid in cash or by check payable to the order of the Company at the time that the award is accepted by the recipient. (c) Number of Shares. The award shall specify the number of shares of Common Stock granted thereunder. (d) Restrictions on Transfer. In addition to such other terms, conditions and restrictions upon awards as shall be imposed by the Board of Directors, all shares issued pursuant to an award shall be subject to the following restrictions: (1) All shares of Common Stock subject to an award (including any shares issued pursuant to paragraph (e) of this Section) shall be subject to certain restrictions on disposition and obligations of resale to the Company as provided in subparagraph (2) below, and shall not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of until such restrictions lapse. The period during which such restrictions are applicable is referred to as the "Restricted Period." The Restricted Period applicable to an award shall end no earlier than the third anniversary of the date the award is made. In addition, vesting of an award may be subject to such additional conditions as the body established under the first sentence of Section 2(d) deems appropriate, including conditions designed to obtain a tax deduction for the Company. (2) In the event that a recipient's employment with the Company, a Parent Corporation or a Subsidiary is terminated within the Restricted Period, whether such termination is voluntary or involuntary, with or without cause, or because of the death or disability of the recipient, the Company shall have the right and option for a period of three months following such termination of employment to buy for cash that number of the shares of Common Stock purchased under the award as to which the restrictions on transfer and the forfeiture provisions contained in the award have not then lapsed, at a price equal to the price per share originally paid by the recipient. If such termination of employment occurs within the last three months of the applicable restrictions, the restrictions shall continue to apply until the expiration of the Company's three month option period. (3) Notwithstanding subparagraphs (1) and (2) above, the Board of Directors may, in its discretion, either at the time that an award is made or at any time thereafter, waive its right to repurchase shares of Common Stock upon the occurrence of any of the events described in this paragraph (d) or remove or modify any part or all of the restrictions. The preceding sentence shall not be applicable with respect to awards which the Committee intends to qualify as performance-based compensation for purposes of Section 162(m) of the Code. In addition, the Board of Directors may, in its discretion, impose upon the recipient of an award at the time of such award, such other restrictions on any shares of Common Stock issued pursuant to such award as the Board may deem advisable and in the best interests of the Company and its shareholders. (e) Additional Shares. Any shares received by a recipient of an award as a stock dividend on, or as a result of stock splits, combinations, exchanges of shares, reorganizations, mergers, consolidations or otherwise with respect to, shares of Common Stock received pursuant to such award shall have the same status and shall A-3 4 bear the same restrictions, all on a proportionate basis, as the shares initially purchased pursuant to such award. (f) Transfers in Breach of Award; Repurchased Shares. If any transfer of shares purchased pursuant to an award is made or attempted contrary to the terms of the Plan and of such award, the Board of Directors shall have the right to purchase for the account of the Company those shares from the owner thereof or his transferee at any time before or after the transfer at the price paid for such shares by the person to whom they were awarded under the Plan. In addition to any other legal or equitable remedies which it may have, the Company may enforce its rights by specific performance to the extent permitted by law. The Company may refuse for any purpose to recognize as a shareholder of the Company any transferee who receives any shares contrary to the provisions of the Plan and the applicable award, and the Company may retain and/or recover all dividends on such shares which were paid or payable subsequent to the date on which the prohibited transfer was made or attempted. (g) Additional Award Provisions. The Committee may, in its sole discretion, include additional provisions in any award granted under the Plan, including without limitation commitments to pay cash bonuses, make or guarantee loans or transfer other property to recipients upon the grant of awards, or such other provisions as shall be determined by the Board of Directors. (h) Restrictions. No award shall be made if the award would cause the number of shares awarded under the Plan to exceed 3% of the total outstanding shares of Common Stock of the Company. 6. OPTIONS. (a) Execution of Option Agreements. As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement in such form not inconsistent with the Plan as may be specified by the Board of Directors. Such option agreements may differ among recipients. (b) Purchase Price; Payment for Stock. The purchase price per share of stock deliverable upon the exercise of an option shall be determined by the Committee, provided that (i) in the case of an Incentive Stock Option, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Committee, at the time of grant of such option, or less than 110% of such fair market value in the case of options described in subparagraph (g)(ii) of Section 6, and (ii) in the case of a non-statutory option, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Committee, at the time of grant of such option. Options granted under the Plan may provide for the payment of the exercise price by delivery of cash or a check to the order of the Company in an amount equal to the exercise price of such options, or by delivery to the Company of shares of Common Stock of the Company already owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, or by any combination of such methods of payment. The fair market value of any shares of the Company's Common Stock which may be delivered upon exercise of an option shall be determined by the Committee. (c) Option Period. Each option and all rights thereunder shall expire on such date as the Committee shall determine, but, in no event after the expiration of five years from the day on which the option is granted and shall be subject to earlier termination as provided in the Plan. (d) Exercise of Options. Each option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option, subject to the provisions of the Plan. (e) Nontransferability of Options. No option granted under the Plan shall be assignable or transferable by the person to whom it is granted, either voluntarily or by operation of law, except by will or the laws of A-4 5 descent and distribution; provided however that non-statutory options may be transferred pursuant to a qualified domestic relation order (as defined in Rule 16b-3). During the life of the optionee, the option shall be exercisable only by such person. (f) Effect of Termination of Employment or Directorship. No option may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her option, employed by, or a director of, the Company, a Parent Corporation or a Subsidiary except that if and to the extent the option agreement or instrument so provides: (i) the option may be exercised within the period of three months after the date the optionee ceases to be an employee of the Company (or within such lesser period as may be specified in the option agreement or instrument); (ii) if the optionee dies while in the employ of the Company, a Parent Corporation or a Subsidiary or within three months after the optionee ceases to be such an employee, the option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the option agreement or instrument); (iii) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while in the employ of the Company, a Parent Corporation or a Subsidiary, the option may be exercised within the period of six months after the date the optionee ceases to be such an employee because of such disability (or within such lesser period as may be specified in the option agreement or instrument); and (iv) if the optionee is a director of the Company, a Parent Corporation or a Subsidiary, the option may be exercised within the period of four and one-half years after the date of the optionee's termination or retirement as a director; provided that in no event may any option be exercised after the expiration date of the option. For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). (g) Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be specifically designated as Incentive Stock Options and shall be subject to the following additional terms and conditions: (i) Dollar Limitation. Incentive Stock Options granted to any employee under the Plan (and any other incentive stock option plans of the Company) shall not, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate fair market value (determined as of the respective date or dates of grant) of more than $100,000. (ii) 10% Shareholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (A) The purchase price per share of the Common Stock subject to such Incentive Stock Option shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and (B) The option exercise period shall not exceed five years from the date of grant. A-5 6 Except as modified by the preceding provisions of this paragraph 6(g), all the provisions of the Plan shall be applicable to Incentive Stock Options granted hereunder. (h) Additional Option Provisions. The Committee may, in its sole discretion, include additional provisions in any option granted under the Plan, including without limitation restrictions on transfer, repurchase rights, commitments to pay cash bonuses, make or guarantee loans or transfer other property to optionees upon exercise of options, or such other provisions as shall be determined by the Board of Directors; provided that such additional provisions shall not be inconsistent with any other term or condition of the Plan and such additional provisions shall not cause any Incentive Stock Option granted under the Plan to fail to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code. (i) Acceleration. The Board of Directors may, in its sole discretion, accelerate the date on which all or any particular option or options granted under the Plan may be exercised; provided, however, that no such acceleration shall be permitted if it would cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3 or if it would cause the disallowance of a compensation deduction under Section 162(m) of the Code. 7. GENERAL RESTRICTIONS. (a) Investment Representations. The Company may require any person to whom an award is made or an option is granted, as a condition of purchasing the shares subject to such award or exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the award or option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws, or with covenants or representations made by the Company in connection with any public offering of its Common Stock. (b) Compliance With Securities Laws. Each award and option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such award or option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such award or option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 8. RIGHTS AS A SHAREHOLDER. The recipient of an award or the holder of an option shall have no rights as a shareholder with respect to any shares covered by the award or option (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such shares) until the date of issue of a stock certificate to him or her for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 9. ADJUSTMENT PROVISIONS. (a) If the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassifica- A-6 7 tion, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock, or other securities, an appropriate and proportionate adjustment may be made in (i) the maximum number and kind of shares reserved for issuance under the Plan, (ii) the maximum number of shares for which options or awards may be made to any individual, (iii) the number and kind of shares or other securities subject to then outstanding options under this Plan, and (iv) the price for each share subject to any then outstanding options under the Plan, without changing the aggregate purchase price as to which such options remain exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section 10 if such adjustment would cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3. (b) Adjustments under this Section 10 will be made by the Board of Directors, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issued under the Plan on account of any such adjustments. 10. MERGERS, ETC. (a) In the event of any merger or consolidation in which outstanding shares of common stock are exchanged for securities, cash or property of a third party (other than any merger or consolidation with any wholly-owned subsidiary of the Company), or in the event that all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other person or entity, or in the event of a liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, shall provide for the assumption by such successor corporation of the obligations of the Company with regard to awards and, as to outstanding options shall provide that all outstanding options shall become exercisable in full immediately prior to such event (except as otherwise provided in the option agreement) and shall either (i) provide that all unexercised options shall be assumed, or equivalent options shall be substituted by the acquiring or successor corporation (or an affiliate thereof), provided that any such options substituted for Incentive Stock Options shall meet the requirements of Section 424(a) of the Code; or (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such merger, consolidation, acquisition, reorganization or liquidation unless exercised by the optionee within a specified number of days (but not less than fifteen days) following the date of such notice. (b) The Company may grant options under the Plan in substitution for options held by employees of another corporation who currently become employees of the Company, or a subsidiary of the Company, as the result of a merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute options be granted on such terms and conditions as the Board of Directors considers appropriate in the circumstances. 11. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or in any award or option shall confer upon any recipient of an award or any optionee any right with respect to the continuation of his or her employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the compensation of the recipient or optionee. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board of Directors at the time of such absence. 12. OTHER EMPLOYEE BENEFITS. The value of an award granted to an employee, the amount of any compensation deemed to be received by an employee as a result of the exercise of an option or the sale of shares received pursuant to an award or A-7 8 upon the exercise of an option will not constitute compensation with respect to which any other employee benefits of such employee are determined, including, without limitation, benefits under any bonus, pension, profit-sharing, life insurance or salary continuation plan, except as otherwise specifically determined by the Board of Directors. 13. DEFINITION OF SUBSIDIARY AND PARENT CORPORATION. (a) Subsidiary. The term "Subsidiary" as used in the Plan shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of an option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (b) Parent Corporation. The term "Parent Corporation" as used in the Plan shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the granting of an option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 14. AMENDMENT OF THE PLAN. The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that without the approval of the shareholders of the Company the Board of Directors may not (a) materially increase the benefits accruing to individuals who participate in the Plan, (b) increase the maximum number of shares which may be issued under the Plan or any limits applicable to individuals (except for adjustments specifically provided in the Plan), (c) materially modify the requirements as to eligibility for participation in the Plan or (d) modify or amend the Plan if the approval of the shareholders is required under Section 422 of the Code or any successor provisions with respect to Incentive Stock Options or under Rule 16b-3. The termination or any modification or amendment of the Plan shall not, without the consent of a recipient of an award or an optionee, affect his or her rights under an award previously made or an option previously granted to him or her. With the consent of the recipient of the award or of the optionee affected, the Board of Directors may amend outstanding awards or option agreements in a manner not inconsistent with the Plan but, except as provided in Section 10, above, may not reduce the purchase or exercise price. The Board of Directors shall have the right to amend or modify (i) the terms and provisions of the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code and (ii) the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3. 15. WITHHOLDING. (a) The Company shall have the right to deduct from payments of any kind otherwise due to the optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of options under the Plan. With the consent of the Company, which may be withheld in its sole discretion, the optionee may elect to satisfy such obligations, in whole or in part, (i) by having the Company withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) delivering to the Company shares of Common Stock already owned by the optionee having a fair market value equal to such withholding obligation. An optionee who has made an election pursuant to this paragraph 14(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. The fair market value of the shares A-8 9 used to satisfy such withholding obligation shall be determined in good faith by the Board of Directors as of the date that the amount of tax to be withheld is to be determined. (b) Notwithstanding the foregoing, in the case of a Reporting Person, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3. (c) If the recipient of an award under the Plan elects, in accordance with Section 83(b) of the Code, to recognize ordinary income in the year of acquisition of any shares awarded under the Plan, the Company will require at the time of such election an additional payment for withholding tax purposes based on the difference, if any, between the purchase price of such shares and the fair market value of such shares as of the date immediately preceding the date of the award. 16. NO REPRICING. Neither the Committee nor the Board of Directors shall have any authority, with or without the consent of the affected option holders, to cancel outstanding options and issue new options with a lower exercise price in substitution for the cancelled options. 17. EFFECTIVE DATE AND DURATION OF THE PLAN. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors, but no options granted under the Plan shall become exercisable unless and until the Plan shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months after the date of the Board's adoption of the Plan, no options shall be granted. Amendments to the Plan not requiring shareholder approval shall become effective when adopted by the Board of Directors. Amendments requiring shareholder approval (as provided in Section 15) shall become effective when adopted by the Board of Directors, but no Incentive Stock Option issued after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such Incentive Stock Option to a particular optionee) unless and until such amendment shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months of the Board's adoption of such amendment, any Incentive Stock Options granted on or after the date of such amendment shall terminate to the extent that such amendment to the Plan was required to enable the Company to grant such option to a particular optionee. Subject to these limitations, options may be granted under the Plan at any time after the effective date and before the date fixed for termination of the Plan. (b) Termination. Unless sooner terminated in accordance with Section 11, the Plan shall terminate upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the final vesting of awards or the exercise or cancellation of options granted under the Plan. If the date of termination is determined under (i) above, then awards and options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such awards, options and stock appreciation rights. Adopted by the Board of Directors on February 15, 1994 A-9 EX-10.S 3 AMENDMENT NO. 3 TO REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10(s) AMENDMENT NO. 3 DATED AS OF JULY 9, 1993 TO REVOLVING CREDIT AGREEMENT DATED AS OF SEPTEMBER 24, 1992 AMENDMENT NO. 3 dated as of July 9, 1993 ("Amendment No. 3"), by and among (a) AUGAT INC. (the "Company"), a Massachusetts corporation having its principal place of business at 89 Forbes Boulevard, Mansfield, Massachusetts 02048 (b) the following wholly-owned subsidiaries of the Company (collectively, the "Borrowing Subsidiaries"), AUGAT WIRING SYSTEMS INC., an Alabama corporation, AUGAT AUTOMOTIVE INC., a Michigan corporation, AUGAT COMMUNICATION PRODUCTS INC. (f/k/a AUGAT COMMUNICATIONS GROUP INC.), a Washington corporation, LRC ELECTRONICS, INC., a New York corporation and REED DEVICES, INC., a Delaware corporation, each having its principal place of business at 89 Forbes Boulevard, Mansfield, Massachusetts 02048 (the Company and the Borrowing Subsidiaries are collectively referred to herein as the "Borrowers"), (c) THE FIRST NATIONAL BANK OF BOSTON, SHAWMUT BANK, N.A and CHEMICAL BANK (the "Banks") and (d) THE FIRST NATIONAL BANK OF BOSTON, as agent for the Banks (the "Agent"), amending certain provisions of the Revolving Credit Agreement dated as of September 24, 1992 (as heretofore amended and in effect, the "Credit Agreement"), by and among the Borrowers, the Banks, and the Agent. Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the Borrowers, the Banks and the Agent desire to amend the Credit Agreement as provided herein; NOW THEREFORE, the parties hereto hereby agree as follows: #1. AMENDMENT TO THE CREDIT AGREEMENT. From and after the Effective Date, as defined in Section 2 hereof, the following sections of the Credit Agreement are hereby amended as follows: (a) Section 1 of the Credit Agreement is hereby amended by deleting the following definitions in their entireties: 1 2 "Accounts Receivable; Borrowing Base; Borrowing Base Report; Determined Value; Eligible Accounts Receivable; Eligible Inventory; Eligible Machinery and Equipment; Officer's Certificate; and Security Fund. (b) Section 1 of the Credit Agreement is hereby further amended by: (i) amending the definition of "Commitment Percentage" by deleting the existing table contained within such definition and substituting in lieu thereof, the following table: "Bank Percentage ----- ---------- FNBB 41.6666675% Shawmut 41.6666675% Chemical 16.6666650%" (ii) amending the definition of "Company Commitment" by deleting the existing table contained within such definition and substituting in lieu thereof, the following table: "Bank Amount ----- ------ FNBB $12,500,000 Shawmut $12,500,000 Chemical $ 5,000,000" and (iii) amending the definition of "Working Capital Commitment" by deleting the existing table contained within such definition and substituting in lieu thereof, the following table: "Bank Amount ----- ------- FNBB $4,166,667 Shawmut $4,166,667 Chemical $1,666,666" (c) Section 2.1(a) of the Credit Agreement is hereby amended by (i) deleting the words "the lesser of (i)" contained in the fourteenth line thereof, (ii) deleting the words "and (ii) the Borrowing Base minus the Working Capital Revolving Credit Loans minus the Working Capital Maximum Drawing Amounts and the sum of Working Capital Unpaid 2 3 Reimbursement Obligations" contained in the fifteenth through the eighteenth lines thereof and (iii) deleting subsection (c) therefrom. (d) Section 2.2(a) of the Credit Agreement is hereby amended by (i) deleting the words "the lesser of (i)" contained in the fifteenth line thereof, (ii) deleting the words "and (ii) the Borrowing Base" contained in the sixteenth line thereof and (iii) deleting subsection (c) therefrom. (e) Section 2.4 of the Credit Agreement is hereby amended by (i) deleting the words "and (viii) that the aggregate amount of Loans (including the Proposed Loan), Maximum Drawing Amount and Unpaid Reimbursement Obligations do not exceed the Borrowing Base" from the sixteenth through nineteenth lines thereof and (ii) deleting the last sentence of such section in its entirety. (f) Section 3.2(a) of the Credit Agreement is hereby amended by (i) deleting the words "the lesser of (i)" contained in the second and third lines thereof and (ii) deleting the words "and (ii) the Borrowing Base minus, the Working Capital Revolving Credit Loans minus the Working Capital Maximum Drawing Amount and the Working Capital Unpaid Reimbursement Obligations" contained in the fifth through the eighth lines thereof. (g) Section 3.2(b) of the Credit Agreement is hereby amended by (i) deleting the words "the lesser of (i)" contained in the fourth and fifth lines thereof and (ii) deleting the words "and (ii) the Borrowing Base" contained in the fifth and sixth lines thereof. (h) Section 4.1(a) of the Credit Agreement is hereby amended by (i) deleting the words "the lesser of (1)" contained in the twenty-third line thereof and (ii) deleting the words "and (2) the Borrowing Base" contained in the twenty-fourth line thereof. (i) Section 7.20(c) of the Credit Agreement is hereby deleted in its entirety. (j) Sections 8.4(e) and (f) of the Credit Agreement are hereby deleted in their entireties. (k) Section 9.3(f) of the Credit Agreement is hereby deleted in its entirety. (l) Section 9.4 of the Credit Agreement is hereby amended by inserting the words ", as amended by The First Amendment to Note Agreement dated as of June 1, 1993," immediately following the word "Agreement" on the fifth line thereof. 3 4 (m) Section 12.5 of the Credit Agreement is hereby deleted in its entirety. (n) Exhibits A-1 and A-2 to the Credit Agreement are hereby deleted and Exhibits A-l and A-2 attached hereto are hereby substituted in lieu thereof. #2. EFFECTIVENESS OF AMENDMENT. The amendments to the Credit Agreement to be made pursuant to Section 1 of this Amendment No. 3 shall become effective as of July 13, 1993 (the "Effective Date"), when the Agent shall have received: (a) this Amendment No. 3 signed by each of the Borrowers and each of the Banks; (b) new amended and restated Company Notes and Working Capital Notes in the form of Exhibit A-1 and A-2 attached hereto with appropriate insertions, signed by the applicable Borrowers; (c) an amendment to the Security Agreement and Trust Indenture in form and substance satisfactory to the Banks certified by the Borrowers; (d) a certificate of the Secretary or Assistant Secretary of each Borrower certifying as to (i) the articles of incorporation of such Borrower, (ii) the by-laws of such Borrower and (iii) the names, titles, incumbency and true signatures of such Borrower's officers authorized to sign this Amendment No. 3; and (e) a favorable opinion of counsel to the Borrowers addressed to the Banks and satisfactory to the Agent and the Banks. #3. Existing Loans. Immediately prior to the Effective Date (a) the sum of the aggregate principal amount of the Company Revolving Credit Loans outstanding, plus the Company Maximum Drawing Amount, plus the Company Unpaid Reimbursement Obligations is equal to $468,257.60, (b) the sum of the aggregate principal amount of the Working Capital Revolving Credit Loans outstanding, plus the Working Capital Maximum Drawing Amount, plus the Working Capital Unpaid Reimbursement Obligations is equal to $9,200,000.00, and (c) the amount of each Bank's Company Revolving Credit Loans and Working Capital Revolving Credit Loans are as set forth on Schedule 1 hereto. On the Effective Date FNBB and Shawmut severally agree to lend to the Company the amounts set forth opposite their name under the captions "New Company Revolving Credit Loans" and "New Working Capital Revolving Credit Loans" on Schedule 1 hereto. On the Effective Date the Company agrees to pay to Chemical the 4 5 amounts set forth opposite its name under the captions "Company Revolving Credit Loan Payment" and "Working Capital Revolving Credit Loan Payment" on Schedule 1 hereto. #4. REPRESENTATIONS AND WARRANTIES. Each of the Borrowers hereby repeats, on and as of the date hereof, each of the representations and warranties made by it in the Credit Agreement, the other Loan Documents and any documents, instruments and agreements related thereto (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to the Credit Agreement as amended hereby. #5. REFERENCE TO AND EFFECT ON CREDIT AGREEMENT. (a) On and after the Effective Date, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, shall mean and be a reference to the Credit Agreement as amended and modified hereby. (b) Except as specifically amended and modified hereby, the Credit Agreement shall remain in full force and effect, and is hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment No. 3 shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Bank under the Credit Agreement. #6. GOVERNING LAW. This Amendment No. 3 shall be deemed to be a contract under the laws of the Commonwealth of Massachusetts and shall for all purposes be construed in accordance with and governed by the laws of said Commonwealth. #7. MISCELLANEOUS. The captions in this Amendment No. 3 are for convenience of reference only and shall not define or limit the provisions hereof. This Amendment No. 3 may be executed in separate counterparts, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Amendment No. 3 it shall not be necessary to produce or account for more than one such counterpart. 5 6 Signed, sealed and delivered, as of the date set forth at the beginning of this Amendment No. 3 by each of the Borrowers, each of the Banks and the Agent. AUGAT INC. By: Marcel P. Joseph ------------------------------- Name: Marcel P. Joseph Title: President AUGAT WIRING SYSTEMS INC. By: John E. Lynch, Jr. ------------------------------- Name: John E. Lynch, Jr. Title: Treasurer AUGAT AUTOMOTIVE INC. By: John E. Lynch, Jr. ------------------------------- Name: John E. Lynch, Jr. Title: Treasurer AUGAT COMMUNICATION PRODUCTS INC. By: John E. Lynch, Jr. ------------------------------- Name: John E. Lynch, Jr. Title: Treasurer LRC ELECTRONICS, INC. By: John E. Lynch, Jr. ------------------------------- Name: John E. Lynch, Jr. Title: Treasurer REED DEVICES, INC. By: John E. Lynch, Jr. ------------------------------- Name: John E. Lynch, Jr. Title: Treasurer THE FIRST NATIONAL BANK OF BOSTON, individually and as Agent By: Richard D. Hill, Jr. ------------------------------- Name: Richard D. Hill, Jr. Vice President 6 7 SHAWMUT BANK, N.A. By: David A. Splaine ----------------------------------- Name: David A. Splaine Title: Vice President CHEMICAL BANK By: Mary E. Cameron ----------------------------------- Name: Mary E. Cameron Title: Vice President 7 8 Schedule 1
New Company New Working Working Capital Revolving Capital Revolving Company Revolving Revolving Credit Bank Credit Loans Credit Loans Credit Loan Payment Loan Payment ---- ------------ ------------ ------------------- ------------ The First National $0 $624,999.75 N/A N/A Bank of Boston Shawmut Bank, N.A. $0 $625,000.50 N/A N/A Chemical Bank N/A N/A $0 1,250,000.25
8 EX-21 4 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 Subsidiaries of the Registrant - ------------------------------ The subsidiaries listed below have been included in the consolidated financial statements filed herewith.
Jurisdiction of Percentage Subsidiaries of the Registrant Incorporation Owned - ------------------------------ --------------- ----------- Augat Automotive GmbH Germany 100 Augat AB Sweden 100 Augat AG Switzerland 100 Augat Communication Products Inc. Washington 100 Augat Electronics Inc. Canada 100 Augat International Limited Virgin Islands 100 Augat KK Japan 100 Augat Limited England 100 Augat Pte Limited Singapore 100 Augat Pty Limited Australia 100 Augat Realty Inc. Massachusetts 100 Augat SA France 100 Augat SA de CV Mexico 100 Augat SRL Italy 100 Augat Wiring Systems Inc. Alabama 100 AUG-ISO Inc. New Jersey 100 AUG-SEP Inc. California 100 Electroform SA Switzerland 100 Elfab Corp. Texas 100 LRC Electronics, Inc. New York 100 Reed Devices, Inc. Delaware 100 Reliable Electronic Finishing Company, Inc. Massachusetts 100 Swiss/Pylon, Inc. Massachusetts 100
EX-23 5 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS Augat Inc.: We consent to the incorporation by reference in Registration Statement Nos. 2-99933, 33-16549, 33-37833 and 33-65590 of Augat Inc. all on Form S-8 of our report dated January 27, 1994 appearing in this Annual Report on Form 10-K of Augat Inc. and its subsidiaries for the year ended December 31, 1993. DELOITTE & TOUCHE Boston, Massachusetts March 25, 1994 -----END PRIVACY-ENHANCED MESSAGE-----