ITEM 1. BUSINESS
Aerovox's predecessor, Aerovox Corporation, began in 1922 producing crystal wireless radios. In 1973, the Aerovox AC capacitor operations, including a plant in New Bedford, Massachusetts, together with the Aerovox name, were purchased from Aerovox Corporation by a newly-created corporation, Aerovox Industries, Inc. In 1978, RTE Corporation ("RTE"), a manufacturer of distribution transformers and other utility electrical products, purchased all of the assets of Aerovox Industries through its newly organized subsidiary, Aerovox Incorporated, a Massachusetts corporation ("Aerovox Massachusetts"). In 1988, RTE was acquired by Cooper Industries ("Cooper"), and Aerovox Massachusetts became an indirect wholly-owned subsidiary of Cooper, through Aerovox Holding Company ("AHC"); a Delaware corporation incorporated on May 3, 1988. On May 26, 1989, Aerovox Massachusetts was merged into AHC and AHC's name was changed to Aerovox Incorporated. The sole purpose of this merger was to eliminate the passive holding company structure. On February 26, 1990, 5,095,086 shares of Aerovox Common Stock were distributed to Cooper shareholders of record on May 5, 1989.
On March 5, 1993, Aerovox purchased all the stock of Aero M, Inc., an aluminum electrolytic capacitor manufacturer, from Cooper Industries. On March 11, 1993, Aerovox purchased certain assets of British aluminum electrolytic capacitor manufacturer, BH Components Ltd., and formed a new company, BHC Aerovox Ltd. which is located in Weymouth, England.
During 1996 Aerovox reorganized its North American capacitor operations. The former Aero M Group was merged with the film capacitor businesses of the Aerovox Group to constitute the North American capacitor business of Aerovox, which includes the aluminum electrolytic capacitors of the Aero M Group and the electrostatic capacitor lines of the former Aerovox Group. In addition, the Company established two small integrated business units for Power Factor Correction products and EMI Filters. The foregoing product lines are manufactured in the Company's three North American capacitor plants - one in New Bedford, Massachusetts and two in Juarez, Mexico. A principal component, aluminum foil for electrolytic capacitors, is produced in the Aerovox plant in Huntsville, Alabama.
PRODUCT DESCRIPTION
Aerovox is a leading manufacturer of electrostatic (film and paper) and aluminum electrolytic capacitors, sold worldwide, principally to original equipment manufacturers (OEMs) for use as components in electrical and electronic products.
Capacitors are basic electrical components that store electrical energy and regulate the frequency, timing and condition of electrical signals. They are used to release predetermined amounts of energy and assist in running an electrical device, to send predetermined amounts of energy to start an electrical device, or to store energy for releases at unscheduled future times. A principal functional element of every capacitor is its dielectric (nonconductive) material, which functions as an insulator separating two electrically charged plates (electrodes). Dielectric systems can be made using a variety of materials, such as air, ceramic, tantalum oxide, aluminum oxide, polypropylene film and paper.
MARKETS AND APPLICATIONS
NORTH AMERICAN CAPACITOR OPERATIONS
Electrostatic Capacitors
Aerovox manufactures electrostatic capacitors in New Bedford, Massachusetts (since 1938), and in Juarez, Mexico where the Company began manufacturing film capacitors in 1992.
All Aerovox alternating current (AC) film capacitors are manufactured with polypropylene film and/or kraft paper, or polyester film (used in small units) as the dielectric system. Aerovox's AC capacitors are utilized for continuous duty in starting permanent split-phase motors and then provide power factor correction during the running phase of the motor circuit. Applications include air conditioners, pumps, refrigerators and other types of equipment. Aerovox AC film capacitors are also utilized in ballasts for high intensity discharge (HID) and fluorescent magnetic lighting fixtures, uninterruptible power supplies (UPS), power supplies, and in welding equipment.
Direct current (DC) film capacitors utilize polyester films and polypropylene (for high frequency applications) as the dielectric system. Applications for Aerovox DC film capacitors
include lighting (for electronic ballasts in fluorescent fixtures), UPS and power supplies, variable speed drives, and equipment for audio, communications and welding applications.
The Company offers a complete line of high voltage, multipurpose custom and pulse power capacitors for medical, industrial and government applications. The smaller models in this product line are used as components in photocopiers, laser equipment, defibrillators and other medical equipment, power supply systems and welding equipment. Aerovox's larger DC capacitors are used in government and university fusion power and particle acceleration research products, government weaponry systems, in equipment for high energy x-rays, and in high speed trains.
The AEROVOX POWER FACTOR CORRECTION BUSINESS UNIT produces low and medium voltage power factor correction systems. These systems are installed in manufacturing facilities, large office buildings and hospitals where use of motor-driven equipment, air conditioning and specialized medical equipment is widespread. Power factor correction capacitors improve a facility's electrical system efficiency thus reducing power costs; they can also reduce the incidence of system problems such as brownouts.
Aluminum Electrolytic Capacitors
Aerovox manufactures AC and DC aluminum electrolytic capacitors for North and South America and Far East markets in Juarez, Mexico (since 1994). Aerovox's AC motor start capacitors are utilized for intermittent duty in the starting of electric motors and in limited gear motor applications. Start capacitors of this type are used in compressor motors, pump motors, dental chairs, garage door openers and other similar applications.
The Company's DC aluminum electrolytic capacitors are used in the electrical equipment and electronic industry primarily for applications such as power supplies, UPS, motor drives and energy discharge applications such as welding, strobes and photo flash.
EMI/RFI Filters
Also organized as an integrated business within the Company is the EMI FILTERS BUSINESS UNIT. EMI filters protect electronic equipment from electrical interference ("noise") coming from the power source and suppress high frequency interference that would otherwise be transmitted out of the equipment along the power cord. They can also be used to suppress high frequency and unintentional "noise" generated in electronic and electromechanical equipment. Applications for EMI filters include computer and computer peripheral equipment, telecommunications and variable speed drives. They are also used in sensitive electronic test and medical equipment.
COMPETITION
Electrostatic Capacitors
AC capacitors are made by several domestic and foreign manufacturers, and competition is intense. In the North American AC capacitor market, Aerovox competes primarily with domestic manufacturers. Aerovox and the General Electric Company are the primary producers, each offering a full line of AC products. Five other suppliers - York, Commonwealth Sprague, American
Radionics, Compania General de Electronica (CGE) in Mexico and Magnetek - though smaller, all manufacture quality products, and contribute to price competition.
Offshore competition has not been a major factor in this market because normally the weight of a typical AC capacitor in relation to its cost and the service requirements of major customers make shipment to the United States uneconomical for overseas suppliers. However, Far East manufacturers are beginning to make inroads into the U.S. markets. Passage in Congress in early 1997 of the Information Technology Agreement (ITA) increases Far East competition, in particular. (The ITA eliminates tariffs on capacitors coming into the United States in four equal steps beginning in July 1997. The staged elimination will be completed by July 2000.) The principal competitive factors in the industry include product quality and reliability, competitive prices, on- time delivery, customer service, the ability to meet rigid customer specifications, currency fluctuations, and the ability to add value to the customer's product.
The North American business of Aerovox is not a major supplier of general purpose AC capacitors in either Europe or Asia and faces strong competition from locally based manufacturers in those markets. However, Aerovox has successfully marketed energy discharge capacitors for specialized applications in Europe and in the Korean market.
A significant number of DC film capacitor manufacturers, both domestic and international, serve the North American market and, accordingly, Aerovox faces stiff competition in this market. The competitive factors are primarily quality, delivery and pricing.
Sales of power factor correction systems are largely influenced by the penalty based rate structure imposed by some utilities on their customers. Aerovox has four primary competitors in this market, all of whom manufacture their own capacitors in addition to building the assemblies. Competitive factors affecting this market are technical solution expertise, delivery performance, and pricing.
Aluminum Electrolytic Capacitors
In the North American AC motor-start capacitor market, Aerovox has one major competitor - North American Philips - but two new entries in the field, North American Capacitor Company (NACC) and Compania General de Electronica (CGE) in Mexico are stimulating competition with low pricing. Offshore competition has not been a factor in this market, but this situation may change with the tariff elimination resulting from passage of the ITA. The principal competitive factors in the industry are delivery, quality, customer service and pricing.
The large can computer grade DC electrolytic capacitor market is dominated by Cornell Dubilier Electronics, North American Philips, and United Chemi-Con. This marketplace has minimum standardization and is considered application- specific, normally requiring design-in and qualification testing by its customers.
EMI/RFI Filters
A significant number of EMI custom filter manufacturers serve the North American marketplace providing strong competition. The principal competitive factors are technical support, quality, delivery and price.
MANUFACTURING
Many of Aerovox's manufacturing processes are automated; mechanization is essential to its ability to control costs in order to meet competitive prices and still maintain acceptable profit margins. The control of quality levels is an equally important function throughout all operations and various tests are conducted to assure continuity of high standards.
Most recently, the Company has embarked on a program to significantly improve operating efficiency. In the New Bedford plant, goals to improve on- time delivery performance, to reduce cycle times, and to reduce inventory investment have been established, and information systems, materials acquisition and flows, and production are being re-designed to meet these goals. Continuous flow pull-through techniques, with emphasis on speed and waste elimination, are replacing inflexible large-quantity batch production on the factory floor.
In December 1992, the Company formed a maquiladora in Juarez, Mexico for the assembly of high labor content AC capacitor products and EMI filters. Both oil filled and dry AC and DC film capacitors are now assembled in this plant (referred to as Plant II by the Company) in addition to EMI filters.
A special products department in New Bedford assembles the custom and pulse power product lines. Power factor correction systems are also assembled in New Bedford.
The key material element of an aluminum electrolytic capacitor is an essentially pure aluminum foil that has been processed, chemically and electrically, to meet the capacitance and voltage specifications of the finished capacitor. This processing, known as etching and forming of the aluminum foil, is done at the Aerovox plant in Huntsville, Alabama. Slitting of the processed foil to required widths is also completed at this plant. The foil is then forwarded to Plant I in Juarez and to BHC Aerovox in England for assembly into a finished aluminum electrolytic capacitor.
BHC AEROVOX LTD.
BHC Aerovox Ltd., located in Weymouth, England, is one of Europes' leading manufacturers of aluminum electrolytic capacitors with sales throughout Europe.
PRODUCTS AND MARKETS
BHC Aerovox is the major supplier of AC motor-start capacitors to the European market, serving the fractional horsepower motor and the compressor markets. Their leading edge technology high voltage DC capacitors are supplied to all the major European motor drives manufacturers. Other applications include uninterruptible power supplies, telecommunication power supplies, traction units for trains, audio / visual equipment, welding equipment and other general industrial electronics applications.
A new building, completed in 1995, created 40% more space for expansion of aluminum electrolytic capacitor production and for the introduction of microwave oven capacitor manufacturing which took place in 1996.
COMPETITION
There is keen competition from a number of European and Far Eastern suppliers for all of the aluminum electrolytic products made by BHC Aerovox. In each of the main countries, there is at least one local supplier. BHC Aerovox has increased its market share by offering technical backup to support a range of high quality, technically advanced products.
There is only one European competitor for microwave capacitors (in Italy). The main competitors are in Korea and the United States. Competitive factors include European manufacturing status, flexible production, small can sizes, pricing and quality.
BHC's business is subject to influence by foreign currency exchange rates, and particularly by the current strength of the pound in comparison to other European currencies. The principal raw material is purchased in US dollars from the parent company, and 55% of all sales are outside the United Kingdom, primarily into Europe.
MANUFACTURING
BHC Aerovox purchases etched aluminum foil from four sources, including the Aerovox foil operation in Huntsville. The etched foil is processed to form a dielectric (aluminum oxide) layer according to the voltage requirements. This processed foil is slit to the required width, wound with specially selected tissue, impregnated with an electrolyte fluid and then assembled into containers. A large part of the production is for custom designs to meet the specific customer applications.
BHC's microwave production is based on the proven technology from Aerovox USA and incorporates state-of-the-art processing equipment.
GENERAL
SALES AND DISTRIBUTION
Aerovox sells its products worldwide to over 1,000 customers, primarily original equipment manufacturers ("OEMs"), who purchase capacitors and other products manufactured by the Company for use as components in the products they manufacture. No one customer, in 1997, accounted for 10% or more of the net sales of the Company. In 1997, approximately 42% of the Company's net sales were to its ten largest customers and 86% were made to its 100 largest customers. The Company expects that sales to these customers will continue to represent a significant portion of its total sales.
Foreign sales, primarily from BHC Aerovox Ltd., the Company's United Kingdom subsidiary, represented approximately 25% of total sales in 1997.
The Company markets most of its products to domestic OEMs primarily through a network of independent manufacturers' sales representative organizations which collectively employ over 200 sales people. Aerovox has enjoyed long-term relationships with many of its sales representatives-some have sold Aerovox products in excess of twenty-five years. The Company's
low and medium voltage power factor correction capacitors, which are manufactured for installation into industrial, commercial and other type facilities, are marketed through a separate group of industrial manufacturers' representatives who specialize in these products. In England and Europe, the Company sells through a combination of direct employees and independent manufacturers' representatives. In addition, independent sales organizations represent the Company in the Far East, Japan, Australia, Mexico, the Middle East and South America. A smaller portion of the Company's sales are through distributors and a few long-standing customers are handled as house accounts.
The Company's sales are relatively seasonal and are affected by Company production and shipping schedules; the net sales for the first half of the year are based on an aggregate average of 122 shipping days compared to 119 days for the last half of the year. Approximately 75% of the net sales are produced under agreements negotiated on an annual basis, usually during the latter part of the year. The Company sells approximately 95% of its products on a manufactured-to-order basis. If an order is canceled the Company bills the customer for materials and labor expended on the order prior to cancellation.
A critical element to the Company's strategy is its emphasis on customer service. The Company maintains continual, multilevel contacts with many customers and places a high priority on meeting each customer's requirements in a timely manner.
BACKLOG
Aerovox's total backlog represents approximately 8.5 weeks of production. The backlog may vary significantly based upon the ordering practice of customers, and the lead times quoted by the Company. The Company's manufacturing lead times vary from two to eight weeks depending on the product type, although some filter products and special larger pulse power products that must be built specifically to order may require longer lead time. The Company books orders, for purposes of calculating backlog, when a firm delivery date that is no more than 12 months out is scheduled. The total active backlog was $19,041,000 at February 21, l998, and $23,963,000 at February 21, 1997. The Company expects to fill all backlog orders scheduled for 1998 delivery.
PRODUCT DEVELOPMENT AND QUALITY CONTROL
Product development and improvement are important elements of Aerovox's strategy. The Company's efforts to develop new products and to improve existing products are continuous and benefit from long-term technical relationships with a number of key suppliers and customers. Formal and informal consultation and discussion on technical matters of common interest with key suppliers have resulted in a number of significant product improvements, including the development of thinner dielectric materials resulting in a more cost efficient capacitor and development of improved capacitor fluid impregnants that reduce capacitance loss.
Technical exchanges between the Company's operations have resulted in the development of additional new products and processes, a trend the Company is fostering particularly with the establishment of an electrolytic foil technical center at the Huntsville plant.
The Company places a high degree of emphasis on quality control both in product design (through improved design specifications) and in the production process by means of continuous process monitoring and control throughout the manufacturing cycle. Statistical Process Control (SPC), a program aimed at encouraging employee involvement and participation through fact-based decision making, is typical of the programs that have helped Aerovox achieve significant quality improvements.
The Company adheres to worldwide quality standards in all its operations. Each of its capacitor manufacturing facilities has achieved International Standards Organization (ISO) 9000 certification. In January 1997, the Aerovox plant in New Bedford and one in Juarez were approved for ISO 9002 recertification, while the electrolytic capacitor plant in Juarez was recertified as an ISO 9002 operation in August 1996. This plant is currently in the process of preparing for a new certification under the same organization as the Aerovox plant in New Bedford and the Company's other Juarez facility. BHC Aerovox Ltd. has been ISO 9001 certified for several years.
MANAGEMENT INFORMATION AND CONTROL SYSTEMS
The Company is currently engaged in a company-wide project to convert all management information and control systems to an integrated and uniform system that is compliant with year 2000 computing requirements. In addition to meeting compliance requirements, the Company expects to gain the benefit of better, more consistent and more timely information. BHC Aerovox Ltd. successfully converted to the new system in January 1998, and North American operations are expected to convert during the fourth quarter of 1998.
RAW MATERIALS
The Company purchases raw materials from a number of regional, national and international suppliers. All of these raw materials are available from a variety of suppliers with whom the Company has had long-term relationships. The Company purchases its plain and metallized polypropylene from several sources in Europe and Asia and three sources in the United States. There are several Company approved suppliers for metallized polyester, two in the United States and two in Europe. A number of sources are approved to provide aluminum foil for the Company's electrolytic products - three in the United States, three in Europe, and two in Asia.
PATENTS, LICENSES AND TRADEMARKS
The Company's most important intellectual property is its capacitor manufacturing processes which have been developed over a period of many years. Aerovox has approximately 22 active patents and three pending patents.
Aerovox licenses some of its product technology and process know-how to a foreign producer of lighting capacitors and a U.S. producer of motor run capacitors. An agreement renewing the foreign license was signed by both companies in September 1996, and with the domestic licensee in March 1997. Licensing income is included in other income in the statement of operations.
The Aerovox trademark is registered or registration is pending in 23 countries in Europe, North and South America, the Far East, the Middle East and Australia. This trademark has been in force since 1976. In addition, the Company holds or has pending, 19 other United States registered trademarks, some of which are registered in other countries. The duration of Aerovox's product trademark registrations range from one year to fifty-nine years. The Company believes that its trademark status helps to maintain the proprietary nature of its products.
EMPLOYEES
As of February 22, 1998, Aerovox had 1,459 employees worldwide. An aggregate of 309 employees hold salaried management, supervisory, sales and clerical positions and 1,150 hourly employees are engaged in production and related activities. Unions represent 2.5% of the employees. None of the Company's production departments are unionized. Approximately 290 employees have been with their respective Aerovox company for 10 years or more.
Aerovox considers its employee relations to be good. There have been no labor stoppages in recent years, and union contracts have been renegotiated without difficulty. In New Bedford, a three-year agreement with the International Union of Operating Engineers is set to expire in April 1998, and a two-year contract with the International Brotherhood of Electrical Workers will also expire in April 1998.
ENVIRONMENTAL COMPLIANCE
The Company has made substantial capital expenditures on environmental controls and compliance at its facilities. See, "Environmental Matters - Environmental Compliance" below.
ITEM 2.
ITEM 2. PROPERTIES
The Company has invested in automation and equipment necessary to increase production capability (primarily for the metallized polypropylene product line) in New Bedford. Capital has also been expended on the research and development laboratory at this location and on equipment to manufacture new products at the Plant II maquiladora in Juarez, Mexico. In Weymouth, England, a 27,000 square foot building to facilitate expanded aluminum electrolytic capacitor and microwave oven capacitor production was completed in 1995. Equipment at Plant I in Juarez continues to be up-graded and new equipment acquired for greater efficiency and capability. A quality control, and research and development labs were installed at the plant in Huntsville, Alabama during 1995. With the exception of the New Bedford plant, as described below, the Company believes that its facilities are adequate for its foreseeable needs. The Company intends to buy or build a new production facility in the New Bedford, Massachusetts area during 1998 and 1999 to replace the existing plant.
ITEM 3.
ITEM 3. ENVIRONMENTAL MATTERS
The Company manufactures film capacitors and maintains its corporate offices in a building located in New Bedford, Massachusetts, which has been occupied by the Company and predecessor organizations also engaged in the manufacture of capacitors since 1938. In June 1997, the United States Environmental Protection Agency (EPA) conducted preliminary tests within the building that revealed the presence of polychlorinated biphenyls (PCBs) on surfaces within the plant. Subsequent engineering tests by independent consultants retained by the Company confirmed the presence of residual PCBs throughout the plant, which resulted from their use prior to 1978. While the Company and its expert advisors consider the PCBs to represent no threat to the health of the employees of the Company or the surrounding community, subsequent engineering studies indicated that the cost to remove PCBs within the building to the levels proscribed by the EPA and the Toxic Substances Control Act would be prohibitive. Therefore, the Company has decided, and has so informed the EPA, that it intends to vacate the building, to demolish it, and to dispose of all contaminated building materials in a legally compliant manner. Accordingly, a reserve was established and charged to income as of December 27, 1997, in the amount of $7,233,000, which the Company believes is adequate to dismantle and dispose of the building, clean equipment located within it, and to pay for related engineering, legal and professional services. Of this amount, approximately $6,000,000 has been classified as a long-term liability. Additionally, the Company wrote-off, as of December 27, 1997, the depreciated value of that building, all improvements thereto, and certain machinery and equipment which the Company believes will become surplus, abandoned, or otherwise unusable upon disposal of the building. The amount of this write-off was $5,767,000.
On February 9, 1990, the Company entered into a settlement agreement (the "Settlement Agreement") with the United States and The Commonwealth of Massachusetts (the "governments") resolving litigation commenced by the governments in the U.S. District Court for the District of Massachusetts, on December 10, 1983 under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly known as the "Superfund" legislation. The litigation concerned the alleged disposal by various defendants of polychlorinated biphenyls (PCBs) in the Acushnet River and New Bedford Harbor. The Settlement Agreement resolved all of the governments' claims against the Company and Aerovox Industries, Inc. (the Company's predecessor, now known as Belleville Industries, Inc.) arising out of the contamination of the Acushnet River and New Bedford Harbor with PCB's, including cleanup costs, study costs and damages to natural resources, now or hereafter incurred, except that the Settlement Agreement provides that the
governments may seek damages from the Company and Aerovox Industries, Inc. for future liability in the event that such future liability arises out of unknown conditions at the site. The Company, based on information presently available, does not believe that this matter will have any further material adverse effect on the Company's financial condition.
ENVIRONMENTAL COMPLIANCE
The Company is currently subject to a National Pollutant Discharge Elimination System (NPDES) permit to discharge water from the New Bedford, Massachusetts facility into the Acushnet River / New Bedford Harbor. The NPDES permit has a limitation of up to 10 parts per billion (ppb) of PCBs in its storm water and other discharges. For several years, the Company and the United States Environmental Protection Agency (EPA) have been discussing possible changes to this permit. In June of 1994, the Company submitted the following plans to the EPA and the Department of Environmental Protection (DEP): Stormwater Study Plan, Quality Assurance Project Plan, and Stormwater Best Management Practices Plan. Aerovox will proceed with implementation of the plans upon receipt of EPA and DEP approvals. The Company cannot predict what further actions the EPA or DEP may take with regard to the permit or what impact any such actions may have on the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable. No matter was submitted to stockholders of the Company during the fourth quarter of fiscal 1997.
ITEM 4A. EXECUTIVE OFFICERS - Set forth below are the names, ages and positions of the executive officers of Aerovox in 1997 and currently:
Mr. Elliott graduated in 1973 from Clarkson University with a Bachelor of Science Degree in Industrial Distribution, and received a Master of Business Administration from the University of Wisconsin in 1981. From 1991 to 1993, Mr. Elliott served as President of Hendrix Wire & Cable, a manufacturer of cable and accessories for the electric utility market, and a business unit of the Electrical Products Division of Eagle Industries, a diversified manufacturing company. From 1993 to 1996, he was Group Executive of Eagle's Electrical Products Division. Mr. Elliott joined Aerovox as President in March 1996 and was named Chief Executive Officer of the Company in September 1996.
Mr. Chmura graduated with a Bachelor of Science degree in Engineering Sciences from the United States Naval Academy in 1967. Mr. Chmura joined Aerovox in 1977 as a product manager.
Since then he has held the positions of Regional Sales Manager, Marketing Manager, Director of Marketing, Director of Sales, Vice President of Sales, and since 1995, Senior Vice President, Sales.
Dr. Hudis holds a Bachelor of Science degree from the University of California in Los Angeles (1965), a PhD in Nuclear Engineering from the Massachusetts Institute of Technology (1970), and a Master of Business Administration from the University of Chicago (1981). He was Vice President for Engineering and Marketing of LH Research, a manufacturer of power supplies, from 1989 to 1991. Dr. Hudis joined Aerovox as Vice President, Technology in January, 1992 and became a Senior Vice President in 1995. He is a senior member of The Institute of Electrical and Electronics Engineers, an international organization of electrical and electronic engineers.
Mr. Miller graduated from Syracuse University with a Bachelor of Science in Electrical Engineering (1964), and holds a Master of Business Administration degree from the Rochester Institute of Technology (1982) and an Executive Master of Business Administration degree from Stanford University (1989). Mr. Miller was Vice President of Operations and Engineering for Microtouch Systems Inc., a manufacturer of computer touch screens, from 1991 to 1996. He joined Aerovox as Senior Vice President, Operations, in 1997.
Mr. Sherman graduated from Bryant College with a Bachelor of Arts degree in 1972. He served as President of Ludell Manufacturing Co., a manufacturer of heat recovery systems and electronic controls for the petro-chemical industry, for five years before joining Aerovox as General Manager of the Electronic Group in 1990. He became Vice President, Marketing, in November 1993, and became a Senior Vice President in 1997.
Mr. Templer holds a Bachelor of Science Degree from Salem State College (1972) and a Master of Business Administration from the Harvard Business School (1974). In 1985 he joined Freudenberg North America Inc., a holding company, as Vice-President, Finance and Administration. In 1988, Mr. Templer was named Vice-President, Finance and Chief Financial Officer of Freudenberg Nonwovens, a manufacturer of nonwoven fabrics and related products, and was President and Chief Executive Officer of that company from 1992 to 1995. In June 1996, Mr. Templer joined Aerovox as Senior Vice President and Chief Financial Officer and was appointed Treasurer in August 1996.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on NASDAQ National Market System under the symbol ARVX. The Company's Common Stock was distributed to the beneficiaries of the Aerovox Liquidating Trust on February 26, 1990. See "Shareholder Information" in the Annual Report to stockholders for the year ended December 27, 1997, incorporated herein by reference, for the quarterly market price range of the Company's Common Stock. The number of shareholders of the Company's Common Stock on March 10, 1998 was 10,028. Of that total, 7,128 were stockholders of record. The Company has not declared dividends previously and currently intends to continue to retain earnings for use in its business and does not expect to pay dividends for the foreseeable future. The Company's common stock dividend policy will be reviewed periodically by the Board of Directors.
ITEM 6.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by this item appears in the Company's 1997 Annual Report to Stockholders on page 23 and is incorporated herein by reference. Such information should be read in conjunction with the Company's consolidated financial statements and the notes thereto which are included in such Annual Report and are incorporated by reference in Item 8 hereof.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item appears in the Company's 1997 Annual Report to Stockholders on pages 7 through 9 and is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of Aerovox Incorporated appear in the Company's 1997 Annual Report to Stockholders on the pages indicated below and are incorporated herein by reference:
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors - Information with respect to all directors may be found in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders on pages 2 and 3 under the caption "Election of Directors," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated herein by reference.
(b) Executive Officers - Information with respect to executive officers appears in Item 4A. of Part I.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
This information is contained in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders on pages 5 through 9 under the caption "Executive Compensation" and "Compensation Committee Report", which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is contained in the Company's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders on pages 10 and 11 under the caption "Security Ownership of Certain Beneficial Owners and Management," which Statement is to be filed with the Securities and Exchange Commission. Such information is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K.
(a) Exhibits - A list of Exhibits filed with or incorporated by reference in this Report on Form 10-K appears at pages 19 through 22 hereof, which list is incorporated herein by reference.
(b) Financial Statements - A list of consolidated financial statements is contained in Item 8 and is incorporated here by reference.
FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts for the years ended 16 December 27, 1997, December 28, l996, and December 30, 1995.
Report of Independent Accountants on Financial Statement Schedules. 17
All other financial statement schedules are inapplicable or the required information is contained in the Company's consolidated financial statements or notes thereto, which have been incorporated by reference herein.
(c) Reports on Form 8-K - None
AEROVOX INCORPORATED VALUATIONS AND QUALIFYING ACCOUNTS (AMOUNTS IN THOUSANDS)
SCHEDULE II
(1) Write-off of accounts receivable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Aerovox Incorporated
Our report on the consolidated financial statements of Aerovox Incorporated has been incorporated by reference in this Form 10-K from page 24 of the 1997 Annual Report to Stockholders of Aerovox Incorporated. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(b) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts February 13, 1998 except for the information presented in Note 3 for which the dates are February 27, l998 and March 11, l998
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Aerovox Incorporated (Registrant)
BY /S/ ROBERT D. ELLIOTT BY /S/ JEFFREY A. TEMPLER - --------------------------- ----------------------------- President and Chief Executive Officer Sr. Vice President and Chief March 23, 1998 Financial Officer March 20, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signatures
/S/ CLIFFORD H. TUTTLE JR. Chairman of the Board March 20, 1998 - ------------------------------------ of Directors Clifford H. Tuttle, Jr.
/S/ RONALD F. MURPHY Secretary March 19, 1998 - ------------------------------------ Ronald F. Murphy
/S/ Director March ____, 1998 - ------------------------------------ John F. Brennan
/S/ DENNIS HOROWITZ Director March 19, 1998 - ------------------------------------ Dennis Horowitz
/S/ SHEREL D. HORSLEY Director March 20, 1998 - ------------------------------------ Sherel D. Horsley
/S/ WILLIAM G. LITTLE Director March 20, 1998 - ------------------------------------ William G. Little
/S/ BENEDICT P. ROSEN Director March 19, 1998 - ------------------------------------ Benedict P. Rosen
/S/ JOHN L. SPRAGUE Director March 19, 1998 - ------------------------------------ John L. Sprague
EXHIBIT INDEX AEROVOX INCORPORATED FORM 10-K (FOR FISCAL YEAR ENDED DECEMBER 27,1997)
EXHIBIT INDEX AEROVOX INCORPORATED FORM 10-K (FOR FISCAL YEAR ENDED DECEMBER 27,1997)
EXHIBIT INDEX AEROVOX INCORPORATED FORM 10-K (FOR FISCAL YEAR ENDED DECEMBER 27,1997)
EXHIBIT INDEX AEROVOX INCORPORATED FORM 10-K (FOR FISCAL YEAR ENDED DECEMBER 27,1997)
* Filed as an Exhibit to Registration Statement on Form 10 filed with the Securities and Exchange Commission on October 4, 1989, and incorporated herein by reference.
** Filed as an Exhibit to Amendment No. 1 to the Registration Statement to Form 10 filed with the Securities and Exchange Commission on December 1, 1989, and incorporated herein by reference.
*** Filed as and Exhibit to Amendment on Form 8 to the Registration Statement on Form 10, filed with the Securities and Exchange Commission on February 16, 1990.