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EX-21 - EXHIBIT 21 - LADISH CO INC | c97323exv21.htm |
EX-23 - EXHIBIT 23 - LADISH CO INC | c97323exv23.htm |
EX-32 - EXHIBIT 32 - LADISH CO INC | c97323exv32.htm |
EX-31.B - EXHIBIT 31(B) - LADISH CO INC | c97323exv31wb.htm |
EX-31.A - EXHIBIT 31(A) - LADISH CO INC | c97323exv31wa.htm |
EX-10.Q - EXHIBIT 10(Q) - LADISH CO INC | c97323exv10wq.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
OR
o | 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 1-34495
Ladish Co., Inc.
( Exact name of registrant as specified in its charter )
Wisconsin ( State of Incorporation ) |
31-1145953 ( I.R.S. Employer Identification No. ) |
|
5481 S. Packard Avenue Cudahy, Wisconsin ( Address of principal executive offices ) |
53110 ( Zip Code ) |
Registrants telephone number, including area code: (414) 747-2611
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of each class | Name of each exchange on which registered | |
Common stock, $0.01 par value | Nasdaq |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
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 þ No o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K
(§229.405 of this chapter) is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ |
The aggregate market value of voting stock held by non-affiliates of the Registrant was
$189,507,328 as of June 30, 2009.
15,903,004
(Number of Shares of common stock outstanding as of March 4, 2010)
(Number of Shares of common stock outstanding as of March 4, 2010)
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into Which | ||||
Documents* | Portions of Documents are Incorporated | |||
Proxy Statement for 2010
Annual Meeting of Stockholders
|
Part III, Item 10. | Directors and Executive Officers of the Registrant | ||
Part III, Item 11. | Executive Compensation | |||
Part III, Item 12. | Security Ownership of Certain Beneficial Owners and Management | |||
Part III, Item 13. | Certain Relationships and Related Transactions | |||
Part III, Item 14. | Principal Accountant Fees and Services |
* | Only the portions of documents specifically listed herein are to be deemed incorporated by
reference. |
TABLE OF CONTENTS
Table of Contents
PART 1
Item 1. Business
General
Ladish Co., Inc. (Ladish or the Company) engineers, produces and markets high-strength,
high-technology forged and cast metal components for a wide variety of load-bearing and
fatigue-resisting applications in the jet engine, aerospace and industrial markets. Approximately
88% of the Companys 2009 revenues were derived from the sale of jet engine parts, missile
components, landing gear, helicopter rotors and other aerospace products. Approximately 44% of the
Companys 2009 revenues were derived from sales, directly or through prime contractors, under
United States government contracts or under contracts with allies of the United States government,
primarily covering defense equipment. Although no comprehensive trade statistics are available,
based on its experience and knowledge of the industry, management believes that the Company is the
second largest supplier of forged and cast metal components to the domestic aerospace industry,
with an estimated 25% market share in the jet engine component field.
Products and Markets
The Company markets its products primarily to manufacturers of jet engines, commercial business and
defense aircraft, helicopters, satellites, heavy-duty off-road vehicles and industrial and marine
turbines. The principal markets served by the Company are jet engine, commercial aerospace
(defined by Ladish as satellite, rocket and aircraft components other than jet engines) and general
industrial products. The amount of revenue and the revenue as a percentage of total revenue by
market were as follows for the periods indicated:
Years Ended December 31, | ||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Jet Engine Components |
$ | 238 | 56 | % | $ | 239 | 51 | % | $ | 193 | 55 | % | ||||||||||||
Aerospace Components |
102 | 24 | % | 124 | 26 | % | 114 | 33 | % | |||||||||||||||
General Industrial Components |
85 | 20 | % | 107 | 23 | % | 43 | 12 | % | |||||||||||||||
Total |
$ | 425 | 100 | % | $ | 470 | 100 | % | $ | 350 | 100 | % | ||||||||||||
Manufacturing
Ladish offers one of the most complete range of forging, investment casting and precision machining
services in the world. The Company employs all major forging processes, including open and
closed-die hammer and press forgings, as well as ring-rolling, and also produces near-net shape
aerospace components through isothermal forging and hot-die forging techniques. Closed-die forging
involves hammering or pressing heated metal into the required shape and size by utilizing machined
impressions in specially prepared dies which exert three-dimensional control on the heated metal.
Open-die forging involves the hammering or pressing of metal into the required shape without such
three-dimensional control, and ring-rolling involves rotating heated metal rings through presses to
produce the desired shape. Investment casting involves the creation of precise wax molds which are
dipped, autoclaved and cast to create near-net components for the aerospace industry. The
Companys precision machining services focus on the milling and turning of components for the
aerospace industry.
2
Table of Contents
Much of the Companys business is capital intensive, requiring large and sophisticated forging,
casting, machining and heating equipment and extensive facilities for inspection and testing of
components after
formation. Ladish believes that it has the largest forging hammer, isothermal press and ring-roll
in the world at its plant in Cudahy, Wisconsin. Its largest counterblow forging hammer has a
capacity of 125,000 mkg (meter-kilograms), and its ring-rolling equipment can produce single-piece
seamless products that weigh up to 350,000 pounds with outside diameters as large as 28 feet and
face heights up to 10 feet. Ladishs 4,500-ton and 10,000-ton isothermal presses can produce
forgings, in superalloys as well as titanium, that weigh up to 2,000 pounds. Ladish is in the
process of qualifying a new 12,500-ton isothermal press which will be operational in 2010. Much of
the domestic forging equipment has been designed and built by Ladish. The Company also maintains
such auxiliary facilities as die-sinking, heat-treating and machining equipment and produces most
of the precision dies necessary for its forging operations. The Company considers such equipment
to be in good operating condition and adequate for the purposes for which it is being used.
Marketing and Sales
The product sales force, consisting primarily of sales engineers, is supported by the Companys
metallurgical staff of engineers and technicians. These technically trained sales engineers,
organized along product line and customer groupings, work with customers on an ongoing basis to
monitor competitive trends and technological innovations. Additionally, sales engineers consult
with customers regarding potential projects and product development opportunities. During the past
few years, the Company has refocused its marketing efforts on the jet engine components market and
the commercial aerospace industry.
The Company is actively involved with key customers in joint cooperative research and development,
engineering, quality control, just-in-time inventory control and computerized process modeling
programs. The Company has entered into strategic contracts for a number of sole-sourced products
with each of Rolls-Royce, Sikorsky and Snecma for major programs. The Company believes that these
contracts are a reflection of the aerospace and industrial markets recognition of the Companys
manufacturing and technical expertise.
The research and development of jet engine components is actively supported by the Companys
Advanced Materials and Process Technology Group. The Companys long-standing commitment to
research and development is evidenced by its industry-recognized materials and process
advancements. The experienced staff and fully equipped research facilities support Ladish sales
through customer-funded projects. Management believes that these research efforts position the
Company to participate in future growth in demand for critical advanced jet engine components.
Customers
The Companys top three customers, Rolls-Royce, United Technologies and General Electric, accounted
for approximately 50%, 47% and 56% of the Companys revenues in 2007, 2008 and 2009, respectively.
Net sales to Rolls-Royce were 28%, 23% and 26%, United Technologies 15%, 15% and 19% and General
Electric 7%, 9% and 11% of total Company net sales for the respective years. No other customer
accounted for ten percent or more of the Companys net sales.
Caterpillar, Boeing, Techspace Aero, Goodrich and Snecma are also important customers of the
Company. Because of the relatively small number of customers for some of the Companys principal
products, the Companys largest customers exercise significant influence over the Companys prices
and other terms of trade.
3
Table of Contents
U.S. exports accounted for approximately 49%, 46% and 46% of total Company net sales in 2007, 2008
and 2009, respectively. U.S. exports to England constituted approximately 29%, 25% and 26%,
respectively in the above years, of total Company net sales.
A substantial portion of the Companys revenues is derived from long-term, fixed price contracts
with major engine and aircraft manufacturers. These contracts are typically requirements
contracts under which the purchaser commits to purchase a given portion of its requirements of a
particular component from the Company, and provide the Company with the ability to adjust prices
based on raw material price fluctuation. Actual purchase quantities are typically not determined
until shortly before the year in which products are to be delivered. The Company attempts to
minimize its risk by entering into fixed-price contracts with its raw material suppliers.
Additionally, a portion of the Companys revenue is directly or indirectly related to government
spending, particularly military and space program spending.
Research and Development
The Company maintains a research and development department which is engaged in applied research
and development work primarily relating to the Companys forging operations. The Company works
closely with customers, universities and government technical agencies in developing advanced
forgings, materials and processes. The Company spent approximately $2.9 million, $3.1 million and
$2.7 million on applied research and development work during 2007, 2008 and 2009, respectively.
Customers reimbursed the Company for $1.2 million, $1.3 million and $1.2 million of the foregoing
research and development expenses in 2007, 2008 and 2009, respectively.
Patents and Trademarks
Although the Company owns patents covering certain of its processes, the Company does not consider
these patents to be of material importance to the Companys business as a whole. The Company
considers certain other information that it owns to be trade secrets and the Company takes measures
to protect the confidentiality and control the disclosure and use of such information. The Company
believes that these safeguards adequately protect its proprietary rights and the Company vigorously
defends these rights.
The Company owns or has obtained licenses for various trademarks, trademark registrations, service
marks, service mark registrations, trade names, copyrights, copyright registrations, patent
applications, inventions, know-how, trade secrets, confidential information and any other
intellectual property that is necessary for the conduct of its business (collectively,
Intellectual Property). The Company is not aware of any existing or threatened patent
infringement claim (or of any facts that would reasonably be expected to result in any such claim)
or any other existing or threatened challenge by any third party that would significantly limit the
rights of the Company with respect to any such Intellectual Property or to the validity or scope of
any such Intellectual Property. The Company has no pending claim against a third party with
respect to the infringement by such third party of any such Intellectual Property that, if
determined adversely to the Company, would individually or in the aggregate have a material adverse
effect on the Companys financial condition or results of operations. While the Company considers
all of its proprietary rights as a whole to be important, the Company does not consider any single
right to be essential to its operations as a whole.
4
Table of Contents
Raw Materials
Raw materials used by the Company in its metal components include alloys of titanium, nickel,
steel, aluminum, tungsten and other high temperature alloys. The major portion of metal
requirements for forged products are purchased from major metal suppliers producing forging quality
material as needed to
fill customer orders. The Company has two or more sources of supply for all significant raw
materials, with the exception of certain nickel-based powder alloys where the Company is currently
dependent upon a single source of supply.
The titanium and nickel-based superalloys used by the Company have a relatively high dollar value.
Accordingly, the Company recovers and recycles scrap materials such as machine turnings, forging
flash, solids and test pieces (by-products). The proceeds from the disposition of by-products
are taken as a reduction to the Companys cost of goods and are not treated as a part of net sales.
The Companys most significant raw materials consist of nickel and titanium alloys. Its principal
suppliers of nickel alloys include Carpenter Technology, Special Metals Corporation and Allegheny
Technologies, Inc. (ATI). Its principal suppliers of titanium alloys are Titanium Metals
Corporation of America (Timet), ATI and RTI International. The Company typically has fixed-price
contracts with its suppliers.
In addition, the Company, its customers and suppliers have undertaken active programs for supply
chain management to reduce overall lead times and the total cost of raw materials. In 2009, the
Company experienced a decline in raw material prices and saw lead times shorten as demand for
material eased due to the global economic downturn. The Company expects raw material prices to
stabilize in 2010 as aerospace markets firm. The Company attempts to protect against raw material
price escalation by passing those price increases directly to the Companys customers.
Energy
The Company uses a considerable amount of energy in the processing of its forged and cast metal
components. The fluctuating prices for energy, both natural gas and electricity, had a significant
impact on the Companys 2008 and 2009 results. With the reduction of natural gas prices, the
Company expects energy to have a reduced impact on 2010 results. The Company attempts to
ameliorate the impact of these price swings by purchasing directly from producers and pre-ordering
supplies for the future, however, the level of price fluctuation and lack of availability are not
within the control of the Company.
Backlog
The average amount of time necessary to manufacture the Companys products is five to six weeks
from the receipt of raw material. The timing of the placement and filling of specific orders may
significantly affect the Companys backlog figures, which are subject to cancellation for a variety
of reasons. In addition, the Company typically only includes those contracts which will result in
shipments within the next 18 months when compiling backlog and does not include the out years of
long-term agreements. As a result, the Companys backlog may not be indicative of actual results
or provide meaningful data for period-to-period comparisons. The Companys backlog was
approximately $611 million, $629 million and $504 million as of December 31, 2007, 2008 and 2009,
respectively. In 2008, the Company received approximately $408 million in new orders and in 2009
the Company received $229 million in new orders as the backlog and order activity were negatively
impacted by 787 delays at Boeing and the unsettled economic climate.
Competition
The sale of metal components is highly competitive. Certain of the Companys competitors are
larger than the Company and have substantially greater capital resources. Although the Company is
the sole supplier on several sophisticated components required by prime contractors under a number
of governmental programs, many of the Companys products could be replaced with other similar
products
of its competitors. However, the significant investment in tooling, the time required and the cost
of obtaining the status of a certified supplier are barriers to entry. Competition is based on
quality (including advanced engineering and manufacturing capability), price and the ability to
meet delivery requirements.
5
Table of Contents
Website Access to Company Reports
The Companys annual report is available free of charge on the Companys website at
www.ladishco.com as soon as reasonably practicable after such material is filed electronically with
the SEC. The Companys other filings with the SEC; Form 10-K, Form 10-Q, Form 8-K and Form 4 are
readily available at www.sec.gov/edgar or www.secfiling.com. The Companys Form 14 Proxy Statement
for the 2010 annual stockholders meeting is available on the Companys website. The Companys
Code of Conduct is available on the Companys website and in printed form upon request. Also,
copies of the Companys annual report will be made available, free of charge, upon written request.
Environmental, Health and Safety Matters
The Companys operations are subject to many federal, state and local regulations relating to the
protection of the environment and to workplace health and safety. In particular, the Companys
operations are subject to extensive federal, state and local laws and regulations governing waste
disposal, air and water emissions, the handling of hazardous substances, environmental protection,
remediation, workplace exposure and other matters. Management believes that the Company is
presently in substantial compliance with all such laws and does not currently anticipate that the
Company will be required to expend any substantial amounts in the foreseeable future in order to
meet current environmental, workplace health or safety requirements. However, additional costs and
liabilities may be incurred to comply with current and future requirements which could have a
material adverse effect on the Companys results of operations or financial condition.
There are no known pending remedial actions or claims relating to environmental matters that are
expected to have a material effect on the Companys financial position or results of operations.
All of the properties owned by the Company, however, are located in industrial areas and have a
history of heavy industrial use. These properties may potentially incur environmental liabilities
in the future that could have a material adverse effect on the Companys financial condition or
results of operations. The Company was previously named a potentially responsible party at several
Superfund sites. The Companys liability with respect to these sites has largely been resolved.
Although the Company does not believe that the amount for which it may be held liable for any
further administrative or wrap-up expense will exceed the amount it has reserved, no assurance can
be given that the amount for which the Company will be held responsible will not be significantly
greater than expected. In 2006, the Company agreed to participate in the environmental remediation
of a site near Houston, Texas. The Companys allocated share is relatively small, less than 1%,
and its projected exposure for the site is estimated to be $0.16 million. The Company has an
accrual of $0.30 million for this site and any other environmental claims which may arise.
With respect to any past or future claim for any environmental, health or safety matter, the
Company evaluates every such claim from both a technical and legal perspective, using outside
consultants where necessary. The Company establishes a good faith estimate of its prospective risk
associated with said claim and, where material, establishes an accrual for the estimated value of
such claim.
6
Table of Contents
Forward Looking Statements
Any statements contained herein that are not historical facts are forward-looking statements within
the meaning of the Private Securities Legislation Reform Act of 1995, and involve risks and
uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives,
future financial performance, estimates, projections, goals and forecasts. Potential factors which
could cause the Companys actual results of operations to differ materially from those in the
forward-looking statements include:
| Market conditions and demand for the Companys products |
|
| Interest rates and capital costs |
|
| Unstable governments and business conditions in emerging
economies |
|
| Health care costs |
|
| Legal, regulatory and environmental issues |
|
| Competition |
|
| Technologies |
|
| Raw material and energy prices |
|
| Taxes |
Any forward-looking statement speaks only as of the date on which such statement is made. The
Company undertakes no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made.
Employees
As of December 31, 2009, domestically, the Company had approximately 1,137 employees, of whom 847
were engaged in manufacturing functions, 65 in executive and administrative functions, 180 in
technical functions, and 45 in sales and sales support. At such date, approximately 517 employees,
principally those engaged in manufacturing, were represented by labor organizations under
collective bargaining agreements. Internationally, the Company had approximately 500 employees in
Poland as of December 31, 2009, approximately two-thirds of which are represented by trade unions.
Number of Employees | ||||||
Represented by Collective | ||||||
Union | Expiration Date | Bargaining Agreement | ||||
International Association of Machinists & Aerospace Workers, Local 1862
|
February 26, 2012 | 193 | ||||
International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers & Helpers, Subordinate Lodge 1509
|
October 1, 2012 | 145 | ||||
International Federation of Professional & Technical Engineers,
Technical Group, Local 92
|
August 19, 2012 | 92 | ||||
International Association of Machinists & Aerospace Workers, Die
Sinkers, Local 140
|
March 26, 2012 | 47 | ||||
Office
& Professional Employees International Union, Clerical Group, Local 35 |
July 15, 2013 | 16 | ||||
International Brotherhood of Electrical Workers, Local 662
|
November 11, 2012 | 20 | ||||
Service Employees International, Local 1
|
April 22, 2012 | 4 |
7
Table of Contents
Executive Officers of the Company
Name | Age | Position | ||||
Gary J. Vroman
|
50 | President & CEO and Director | ||||
Wayne E. Larsen
|
55 | Vice President Law/Finance & Secretary and Director | ||||
Lawrence C. Hammond
|
62 | Vice President, Human Resources | ||||
Randy B. Turner
|
60 | President Pacific Cast Technologies, Inc. (PCT) | ||||
John Delaney
|
60 | President Stowe Machine Co., Inc. (Stowe) &
Aerex LLC (Aerex) |
||||
Robert C. Miller
|
59 | President Valley Machining, Inc. (Valley) | ||||
Jozef Burdzy
|
58 | President Zaklad Kuznia Matrycowa Sp. z o.o. (ZKM) &
Zaklad Obrobki i Procesow Specjalnych Sp. z o.o. (ZOPS) |
||||
Shannon J. S. Ko
|
67 | President Chen-Tech Industries, Inc. (Chen-Tech) |
Item 1A. Risk Factors
Cyclicality of the Aerospace and Jet Engine Industries
Substantially all of our revenues are derived from the aerospace and jet engine industries, which
are cyclical in nature and subject to changes based on general economic conditions, airline
profitability, passenger ridership and international relations. The duration and severity of
upturns and downturns in these industries are influenced by a variety of factors, including those
set forth herein. Accordingly, they cannot be predicted with any certainty. Historically, orders
for new commercial aircraft and related commercial aerospace components have been driven by the
operating profits or losses of commercial airlines. Purchases by customers in the military
aerospace sector are dependent upon defense budgets. Events adversely affecting the airline
industry, such as cyclical overcapacity and inability to maintain profitable fare structures, would
likely have a material adverse effect on our financial condition and results of operations.
Reduction in Government Spending
Since 2002, approximately 25% to 40% of our annual revenues have been derived from the
government-sponsored aerospace industry, an industry that is dependent upon government budgets and,
in particular, the United States government budget. There can be no assurance that U.S. defense
and space budgets and the related demand for defense and space equipment will continue or that
sales of defense and space equipment to foreign governments will continue at present levels.
Competition
The sale of metal components for the aerospace, jet engine and industrial markets is highly
competitive. Many products we manufacture are readily interchangeable with the products
manufactured by our competitors. Many of our products are sold under long-term contracts which are
bid upon by several suppliers. Our principal competitor, Precision Castparts Corp. (PCC), is a
substantially larger business and has greater financial resources. In 2006, PCC purchased one of
our larger suppliers of nickel-based alloys, Special Metals Corporation.
Reliance on Major Customers
Our three largest customers accounted for approximately 50%, 47% and 56% of our revenues in 2007,
2008 and 2009, respectively. Because of the small number of customers for some of our principal
products, those customers exercise significant influence over our prices and other terms of trade.
The loss of any of our largest customers could have a material adverse effect on our financial
condition and results
of operations. The labor strike at Boeing during the second half of 2008 had a negative impact
upon the entire commercial aviation industry including the Company.
8
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Dependence on Key Personnel
We have been and continue to be dependent on certain key management personnel. Our ability to
maintain our competitive position will depend, in part, upon our ability to retain these key
managers and to continue to attract and retain highly qualified managerial, manufacturing and sales
and marketing personnel. There can be no assurance that the loss of key personnel would not have a
material adverse effect on our results of operations or that we will be able to recruit and retain
such personnel.
Product Liability Exposure
We produce many critical engine and structural parts for commercial and military aircraft and for
other specialty applications. As a result, we have an inherent risk of exposure to product
liability claims. We currently maintain product liability insurance, but there can be no assurance
that insurance coverage will continue to be available on terms acceptable to us or that such
coverage will be adequate for any liabilities that might be incurred.
Availability and Price of Raw Materials
The largest single component of our cost of goods sold is raw material costs. We manufacture
products in a wide variety of specialty metals and alloys, some of which can only be purchased from
a limited number of suppliers. We hold limited quantities of raw materials in inventory but, for
the principal part of our business, we seek to procure delivery of raw materials in quantities and
at times matching customers orders. We, along with other entities in the industry, have
experienced periods of increased delivery times for nickel-based and titanium alloys and certain
stainless steels, which account for a significant portion of our raw materials. Significant
scarcity of supply of raw materials used by us could have a material adverse effect on our results
of operations by affecting both the timing of delivery and the cost of purchasing such materials.
In addition, our largest competitor, PCC, has purchased one of our largest suppliers of
nickel-based alloys. Many of our products are sold pursuant to long-term agreements with our
customers, which currently provide us the right to pass through material cost increases. Any
inability to obtain such rights in future long-term agreements could have a material adverse effect
on our results of operations.
Labor Contracts
Approximately 45% of our domestic employees are represented by seven collective bargaining units.
Contracts were historically renegotiated every three years with each union. Six of the unions in
2006 and one union in 2007 entered into six-year agreements with the Company. While we do not
expect that work stoppages will arise in connection with the renewal of labor agreements expiring
in the foreseeable future, no assurance can be given that work stoppages will not occur. An
extended or widespread work stoppage could have a material adverse effect on our results of
operations.
Pension and Other Postretirement Benefit Obligations
Many of our employees are eligible to participate in various Company-sponsored pension plans. In
addition to pension benefits, we provide health care and life insurance benefits to our eligible
employees and retirees. The pension benefits have been and will continue to be funded through
contributions to pension trusts, while health care and life insurance benefits are paid as
incurred.
9
Table of Contents
We have several pension plans, all of which are underfunded. The aggregate actuarially determined
liability recorded for these pension plans on the balance sheet at December 31, 2009 was
approximately $79.3 million. The decline in the equity market in the United States in 2008 had a
negative impact upon the level of assets in the pension trust of the Company; a portion of that
decline was recovered in 2009.
The actuarially determined liability recorded for postretirement health care and life insurance
benefits on the balance sheet at December 31, 2009 was approximately $33.7 million and will be paid
as incurred.
Compliance with Environmental and Other Government Regulations
Our operations are subject to extensive environmental, health and safety laws and regulations
promulgated by federal, state and local governments. Many of these laws and regulations provide
for substantial fines and criminal sanctions for violations. The nature of our business exposes us
to risks of liability due to the use and storage of materials that can cause contamination or
personal injury if released into the environment. In addition, environmental laws may have a
significant effect on the nature, scope and cost of cleanup of contamination at operating
facilities. It is difficult to predict the future development of such laws and regulations or
their impact on future earnings and operations, but we anticipate that these standards will
continue to require continued capital expenditures. There can be no assurance that we will not
incur material costs and liabilities in the future relating to environmental matters.
Risks Related to Significant Price Concessions to Our Customers and Increased Pressure to Reduce
Our Costs
We are subject to substantial competition in all of the markets we serve, and we expect this
competition to continue. As a result, we have made significant price concessions to our customers
in the aerospace and industrial markets in recent years and we expect customer pressure for price
concessions to continue. Maintenance of our profitability will depend, in part, on our ability to
sustain a cost structure that enables us to be cost-competitive. If we are unable to adjust our
cost relative to our pricing or if we are unable to continue to compete effectively, our business
will suffer.
Our Business is Affected by Federal Rules, Regulations and Orders Applicable to Government
Contractors
A number of our products are manufactured and sold under U.S. government contracts or subcontracts.
Violation of applicable government rules and regulations could result in civil liability, in
cancellation or suspension of existing contracts or in ineligibility for future contracts or
subcontracts funded in whole or in part with federal funds.
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Risks Associated with International Operations
We purchase products from and supply products to businesses located outside of the United States.
In fiscal 2009, approximately 54% of our total sales were attributable to non-U.S. customers. A
number of risks inherent in international business could have a material adverse effect on our
future results of operations, including:
| currency fluctuations; |
|
| general economic and political uncertainties and potential for social unrest in international markets; |
|
| limitations on our ability to enforce legal rights and remedies; |
|
| changes in trade policies; |
|
| tariff regulations; |
|
| difficulties in obtaining export and import licenses; and |
|
| the risk of government financed competition. |
Our Business Involves Risks Associated with Complex Manufacturing Processes
Our manufacturing processes depend on certain sophisticated and high-value equipment, such as some
of our forging presses for which there may be only limited or no production alternative.
Unexpected failures of this equipment may result in production delays, revenue loss and significant
repair costs. In addition, equipment failures could result in injuries to our employees.
Moreover, the competitive nature of our business requires that we continuously implement process
changes intended to achieve product improvements and manufacturing efficiencies. These process
changes may at times result in production delays, quality concerns and increased costs. Any
disruption of operations at our facilities due to equipment failures or process interruptions could
have a material adverse effect on our business.
Acquisitions
We expect that we will continue to make acquisitions of, investments in, and strategic alliances
with complementary businesses, products and technologies to enable us to add products and services
for our core customer base and for related markets, and to expand our business geographically. The
success of this acquisition strategy will depend on our ability to: identify suitable businesses
to buy; negotiate the purchase of those businesses on terms acceptable to us; complete the
acquisitions within our expected time frame; improve the results of operations of the businesses
that we buy and successfully integrate their operations into our own; and avoid or overcome any
concerns expressed by regulators.
We may fail to properly complete any or all of these steps. We may not be able to find appropriate
acquisition candidates, acquire those candidates that we do find, obtain necessary permits or
integrate acquired businesses effectively and profitably.
Some of our competitors are also seeking to acquire similar businesses, including competitors that
have greater financial resources than we do. Increased competition may reduce the number of
acquisition targets available to us and may lead to less favorable terms as part of any
acquisition, including higher purchase prices. If acquisition candidates are unavailable or too
costly, we may need to change our business strategy.
We also cannot be certain that we will have enough capital or be able to raise enough capital on
reasonable terms, if at all, to complete the purchases of the businesses that we want to buy. Our
credit facility limits our ability to make acquisitions. Our lender may object to certain
purchases or place conditions on them that would limit their benefit to us.
If we are unsuccessful in implementing our acquisition strategy for the reasons discussed above or
otherwise, our financial condition and results of operations could be materially adversely
affected.
Item 1B. Unresolved Staff Comments
The Company has no unresolved comments from the Commission staff.
11
Table of Contents
Item 2. Properties
The following table sets forth the location and size of the Companys seven facilities:
Approximate Acreage | Approximate Square Footage | |||||||
Forging Cudahy, Wisconsin |
140.0 | 1,650,000 | ||||||
Stowe Windsor, Connecticut |
8.2 | 40,000 | ||||||
PCT Albany, Oregon |
14.0 | 149,000 | ||||||
Valley Coon Valley, Wisconsin |
3.0 | 40,000 | ||||||
ZKM Stalowa Wola, Poland |
70.0 | 820,000 | ||||||
Chen-Tech Irvine, California |
2.0 | 55,000 | ||||||
Aerex Windsor, Connecticut |
1.0 | 15,000 |
The above facilities, except for Chen-Tech and Aerex, are owned by the Company.
The Company believes that its facilities are well maintained, are suitable to support the Companys
business and are adequate for the Companys present and anticipated needs. While the rate of
utilization of the Companys manufacturing equipment is not uniform, the Company estimates that its
facilities overall are currently operating at approximately 50% of capacity.
The principal executive offices of the Company are located at 5481 South Packard Avenue, Cudahy,
Wisconsin 53110. Its telephone number at such address is (414) 747-2611.
Item 3. Legal Proceedings
From time to time the Company is involved in legal proceedings relating to claims arising out of
its operations in the normal course of business. Although the Company believes that there are no
material legal proceedings pending or threatened against the Company or any of its properties, the
Company has been named as a defendant in a number of asbestos cases in Mississippi, Illinois,
Wisconsin and California. As of December 31, 2009, the Company has been dismissed from the case in
California and has 11 individual claims in Mississippi, two individual claims remaining in Illinois
and one individual claim in Wisconsin. The Company has never manufactured or processed asbestos.
The Companys only exposure to asbestos involves products the Company purchased from third parties.
The Company has notified its insurance carriers of these claims and is vigorously defending these
actions. The Company has not made any provision in its financial statements for the asbestos
litigation.
The Company is participating in an investigation initiated by U.S. Customs & Border Protection
(Customs) into duty drawback claims filed on behalf of the Company by its former export agent.
The Company is cooperating with Customs in this investigation and has voluntarily suspended its
duty drawback claims. Based upon its internal investigation, the Company believes any errors or
omissions with respect to its filings were solely attributable to its former export agent. The
Company intends to continue to cooperate with Customs in resolving this matter. The Company has
not made any provision in its financial statements for the Customs investigation.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of 2009.
12
Table of Contents
PART II
Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
The common stock of the Company, par value $0.01 per share, trades on the Nasdaq National Market
under the symbol LDSH.
The following table sets forth, for the fiscal periods indicated, the high and low closing prices
for each quarter of the years 2007, 2008 and 2009. At December 31, 2009 there were an estimated
2,500 beneficial holders of the Companys common stock.
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
December 31, 2007 | December 31, 2008 | December 31, 2009 | ||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
First quarter |
$ | 44.40 | $ | 35.08 | $ | 41.94 | $ | 32.90 | $ | 15.34 | $ | 5.36 | ||||||||||||
Second quarter |
$ | 44.39 | $ | 37.22 | $ | 37.35 | $ | 20.59 | $ | 15.04 | $ | 7.28 | ||||||||||||
Third quarter |
$ | 56.21 | $ | 40.96 | $ | 27.56 | $ | 18.75 | $ | 16.48 | $ | 10.88 | ||||||||||||
Fourth quarter |
$ | 59.30 | $ | 40.03 | $ | 19.74 | $ | 11.47 | $ | 16.03 | $ | 11.79 |
The Company has not paid cash dividends and currently intends to retain all its earnings to
reduce debt and to finance its operations, its stock repurchase program and future growth. The
Company does not expect to pay dividends for the foreseeable future.
TOTAL SHAREHOLDER RETURN
The following graph compares the period percentage change in Ladishs cumulative total
shareholder return on its common stock, assuming dividend reinvestment, with the cumulative total
return of (i) the Russell 2000 Small Cap Index, and (ii) a peer group from the Companys industry,
for the period of December 31, 2004 to December 31, 2009. The Companys peer group is comprised of
PCC, ATI, Timet and SIFCO Industries, Inc.
Dec-31-04 | Dec-31-05 | Dec-31-06 | Dec-31-07 | Dec-31-08 | Dec-31-09 | |||||||||||||||||||
Ladish
|
11.60 | 22.35 | 37.08 | 43.19 | 13.85 | 15.05 | ||||||||||||||||||
Russell 2000
|
651.57 | 673.22 | 796.89 | 765.90 | 499.45 | 625.39 | ||||||||||||||||||
Industry Peers
|
26.29 | 67.53 | 73.05 | 86.93 | 24.94 | 45.51 |
13
Table of Contents
Item 6. Selected Financial Data
The selected financial data of the Company for each of the last five fiscal years are set forth
below.
The data below should be read in conjunction with the Financial Statements and the Notes thereto
and Managements Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere in this filing.
Year Ended December 31, | ||||||||||||||||||||
(Dollars in millions, except earnings per share) | ||||||||||||||||||||
INCOME STATEMENT DATA | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
Net sales |
$ | 266.841 | $ | 369.290 | $ | 424.631 | $ | 469.466 | $ | 349.832 | ||||||||||
Income from operations |
23.847 | 48.960 | 52.319 | 39.538 | 9.248 | |||||||||||||||
Interest expense |
2.072 | 3.548 | 2.528 | 1.971 | 5.050 | |||||||||||||||
Net income |
13.715 | 28.481 | 32.288 | 32.205 | 6.094 | |||||||||||||||
Basic earnings per share |
1.00 | 2.01 | 2.22 | 2.15 | 0.38 | |||||||||||||||
Diluted earnings per share |
0.98 | 2.00 | 2.22 | 2.15 | 0.38 | |||||||||||||||
Dividends paid |
| | | | | |||||||||||||||
Shares used to compute earnings per share: |
||||||||||||||||||||
Basic |
13,781,586 | 14,136,946 | 14,516,120 | 14,998,437 | 15,901,833 | |||||||||||||||
Diluted |
13,931,539 | 14,205,641 | 14,550,258 | 15,000,844 | 15,902,246 |
December 31, | ||||||||||||||||||||
BALANCE SHEET DATA | 2005 | 2006 | 2007 | 2008 | 2009 | |||||||||||||||
Total assets |
$ | 296.556 | $ | 329.060 | $ | 381.833 | $ | 509.466 | $ | 469.514 | ||||||||||
Net working capital |
71.116 | 123.764 | 130.855 | 138.910 | 137.515 | |||||||||||||||
Total debt |
45.000 | 54.100 | 53.500 | 118.900 | 90.000 | |||||||||||||||
Stockholders equity |
117.469 | 152.670 | 201.554 | 223.411 | 225.582 |
Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
Executive Overview
2009 was a transitional year for Ladish. The Company entered the year fully cognizant of the
global economic issues associated with credit and the capital markets which occurred in the second
half of 2008. However, Ladish, with $629 million of contract backlog, had yet to be significantly
impacted by the recession. The global economic slowdown began impacting Ladish in the first
quarter of 2009 as delivery schedules for products began to shrink and move out to later dates. By
June 30, 2009, the Companys contract backlog had declined to $488 million. The third quarter was
the nadir for the Company both in terms of sales, $76.2 million, a pretax loss of $3.0 million, and
a contract backlog of $476 million. The fourth quarter brought signs of an economic recovery for
Ladish. Net sales increased to $83.2 million, pretax income was $3.3 million and contract backlog
increased to $504 million.
In response to the sudden downturn in business, Ladish took a number of steps to reduce costs while
still maintaining the ability to serve customers shifting demands. Employment levels were reduced
from 2,039 to 1,637, a 20% decline. In addition, the Company instituted a salary freeze for 2009
and reduced certain discretionary benefits. At a number of the operating units of the Company,
weeks of lay-off and unpaid weeks were also utilized to reduce costs. During the course of this
business slowdown, the Company significantly reduced its working capital by lowering inventory by
$36.6 million and receivables by $19.3 million. Ladish also reduced its capital expenditures from
the 2008 peak of $49.8 million to $13.9 million in 2009. Through its focus on cost control and
working capital reduction in 2009, Ladish generated over $44 million of positive cash flow.
14
Table of Contents
While many businesses faced credit difficulties and shortages of liquidity in 2009, Ladish avoided
those balance sheet challenges by deleveraging itself through the repayment of $28.9 million of
senior bank debt and $1.7 million of capital leases. The Company also proactively worked with both
its senior bank lenders and the holders of its long-term notes to adjust covenants in the
respective agreements to provide the Company added operational flexibility. Ladish ended 2009 with
no bank debt, no capital leases, $90 million of long-term notes, $19.9 million in cash and in full
compliance with all covenants and requirements in its lending agreements.
Net income in 2009 had a tax benefit of $2.9 million in lieu of a tax provision. The tax benefit
resulted primarily from the decision of the Company to reverse a $5.3 million valuation allowance
for a manufacturing investment credit in Wisconsin. This decision was largely influenced by
legislative changes in Wisconsin in late 2009 along with the Companys long-term optimistic outlook
toward full utilization of the credit. The tax credit contributed to Ladishs $6.1 million, or
$0.38 per share, of earnings in 2009. Without the tax credit, Ladish would have had $0.8 million,
or $0.05 per share, of earnings in 2009.
All three of Ladishs major markets declined in 2009, albeit at varying rates. In 2009, component
sales were down 8% for aerospace, 19% for jet engines and 60% for general industrial. In spite of
these declines, the Companys domestic operations remained profitable in 2009. The Companys
European operations are currently primarily dependent on the industrial market and could not
sufficiently offset the lack of demand in order to produce positive results.
Results of Operations
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
2009 net sales were $349.8 million, a 25.5% reduction from the $469.5 million of net sales in 2008.
The decline in sales was due to reduced demand in all of the Companys markets. The Companys
sales of components for jet engines, aerospace and general industrial declined 19%, 8% and 60%,
respectively, as customers reduced their build schedules and destocked their inventory. In 2009,
cost of sales at the Company increased to 92.3% of net sales in comparison to 87.4% in 2008. The
percentage increase in 2009 is directly linked to the reduction of sales with fewer sales to cover
the fixed costs at the Company.
SG&A expenses at the Company were $17.8 million in 2009, in contrast to $19.8 million of SG&A
expenses in 2008. Although the Company experienced a $2 million year-over-year reduction in SG&A,
as a percentage of sales SG&A increased to 5.1% in 2009 from 4.2% during the same period in 2008.
The increased rate of SG&A expense in 2009 is attributable to a combination of one-time charges
related to employment reductions and the reduced level of sales.
Interest expense at the Company in 2009 was $5.1 million, a $3.1 million increase from the level in
2008. The growth of interest expense in 2009 was related to a full year of interest on the Series
C long-term notes along with the reduction of capitalized interest in 2009. The Company was able
to capitalize $2.4 million of interest in 2008 while it only capitalized $1.0 million of interest
in 2009. Total interest incurred was $6.0 million and $4.4 million, respectively, in 2009 and
2008. The following table reflects the Companys treatment of interest in 2008 and 2009:
(Dollars in millions) | 2008 | 2009 | ||||||
Interest expensed |
$ | 1.971 | $ | 5.050 | ||||
Interest capitalized |
2.418 | 0.953 | ||||||
Total |
$ | 4.389 | $ | 6.003 | ||||
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The Company earned $3.1 million and $38.3 million of pretax income, respectively, in 2009 and 2008.
The decline in pretax income was due to decreased sales and increases in pension expense, interest
expense, depreciation expense, costs associated with downsizing operations and lower by-product
sales in 2009. These expense increases were somewhat offset by reductions in employment costs
related to lower employment levels in 2009.
In 2009, the Company reversed a valuation allowance and recognized a tax asset in the amount of
$5.3 million which resulted in a tax benefit of $2.9 million. The tax asset related to a credit
for state taxes which the Company determined it was more likely than not that the Company would
earn sufficient income to fully utilize the credit. In 2008, the Company had a tax provision of
$5.9 million for an effective rate of 15.4%.
Net income for 2009 was $6.1 million or $0.38 per share on a fully diluted basis. The decline from
2008 net income of $32.2 million was a result of reduced sales combined with increases in pension
expense of $4.4 million, interest expense of $3.1 million, depreciation expense of $2.0 million,
employment reduction expenses of $3.0 million and reduced by-product sales of $7.9 million, offset
by the recognition of the state tax credit of $5.3 million.
The Company ended 2009 with a contract backlog of $504 million, down from the 2008 ending backlog
of $629 million. In 2009, the Company booked $229 million of new orders in contrast to $408
million of new orders in 2008. The decline in new orders was related to the global slowdown in the
aerospace market associated with reduced passenger miles in 2009.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Net sales in 2008 were $469.5 million, a 10.6% increase over the $424.6 million of net sales in
2007. The sales growth in 2008 was due to the continued strength of Ladishs markets and the
acquisitions of Aerex and Chen-Tech in the third quarter of 2008. In 2008, cost of sales for the
Company was 87% of net sales in comparison to 84% of net sales in 2007.
The Companys SG&A expense in 2008 was $19.8 million, or 4.2% of net sales. In 2007, SG&A expense
was 3.9% of net sales. The percentage increase in SG&A expense is attributed to growth in
employment to support capacity expansion and higher professional fees associated with tax planning.
In 2008, the Companys interest expense was $2.0 million in comparison to $2.5 million in 2007.
The decrease in interest expense in 2008 was the result of a larger amount of interest capitalized
associated with the capacity expansion programs at the Company. Total interest increased in 2008
as the Company incurred additional debt to support the acquisitions of Aerex and Chen-Tech. The
following table reflects the Companys treatment of interest for the years 2007 and 2008:
(Dollars in millions) | 2007 | 2008 | ||||||
Interest expensed |
$ | 2.528 | $ | 1.971 | ||||
Interest capitalized |
0.795 | 2.418 | ||||||
Total |
$ | 3.323 | $ | 4.389 | ||||
Pretax income in 2008 was $38.3 million, an $11.9 million reduction from the 2007 pretax income
level. The decline in pretax income was due to product mix and under-absorbed fixed costs.
Tax expense for 2008 was $5.9 million, which equated to an effective tax rate of 15.4%. In 2007,
the Company experienced an effective tax rate of 35.5%. The reduction in tax rate is mainly
attributed to the
Company recognizing a significant tax savings from the recognition of a $5.5 million research and
development tax credit in the third quarter of 2008 and a $1.9 million foreign economic zone
credit.
16
Table of Contents
Net income in 2008 was $32.2 million, which equates to $2.15 per share on a fully-diluted basis.
Net income was similar to 2007 levels but declined as a percentage of sales due to higher raw
material and energy costs, a less profitable mix of products sold and inefficiencies associated
with expanding manufacturing capacity, offset by the aforementioned tax savings and the
capitalization of interest expense to capital projects.
The Company booked $408 million of new orders in 2008 in comparison to $534 million of new orders
in 2007. The decline in orders was associated with the Boeing labor stoppage in the third quarter
of 2008 and general, global economic conditions.
Liquidity and Capital Resources
The Companys cash position as of December 31, 2009 is $15 million more than its position at
December 31, 2008. The 2009 increase in cash is due to reduced capital expenditures and pension
contributions along with a reduction in working capital. Cash flow from operations in 2009 was
$29.6 million more than cash flow from operations in 2008 primarily due to working capital
reduction as the Company reduced inventories and receivables, partially offset by a reduction in
accounts payable.
On May 16, 2006, the Company sold $40 million of Series B Notes in a private placement to certain
institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14% per
annum with interest being paid semiannually. The Series B Notes have a ten-year duration with the
principal amortizing equally over the duration after the fourth year.
On September 2, 2008, the Company sold $50 million of Series C Notes in a private placement to
certain institutional investors. The Series C Notes are unsecured and bear interest at a rate of
6.41% per annum with interest being paid semiannually. The Series C Notes have a seven-year
duration with the principal amortizing equally over the duration after the third year.
The Companys Series B and Series C Notes contain financial covenants which (a) limit the
incurrence of certain additional debt; (b) require a certain level of consolidated adjusted net
worth; (c) require a minimum fixed charges coverage ratio; and (d) require a limited amount of
funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits funded
debt to 60% of total capitalization. At December 31, 2009, funded debt at Ladish was at 21% of
total capitalization. This covenant also limits priority debt to 20% of adjusted net worth.
Ladish had no priority debt at December 31, 2009. The covenant on adjusted net worth requires a
minimum of $112.8 million. At December 31, 2009, Ladish had $259.8 million of adjusted net worth.
The covenant on fixed charges coverage ratio requires that consolidated cash flow to fixed charges
be a minimum of 2.00. The Companys fixed charges coverage ratio at December 31, 2009 was 4.77.
The final covenant on funded debt to consolidated cash flow allows for a maximum level of 4.00. At
December 31, 2009, the Companys actual level was 2.91. The Note Agreement for the Series B and
Series C Notes also contains customary representations and warranties and events of default.
At December 31, 2009, the Company was in compliance with all covenants in the Series B and Series C
Notes and the Facility.
In addition, the Company and a syndicate of lenders have entered into a $35 million unsecured
revolving line of credit (the Facility) which was most recently renewed on April 10, 2009. The
Facility bears interest at a rate of LIBOR plus 2.00% or at a base rate. At December 31, 2009,
there were no
borrowings under the Facility and $35 million of credit was available pursuant to the terms of the
Facility. The Facility has a maturity date of April 9, 2010. The Company expects to renew the
Facility on similar terms, as it has for each of the past nine years.
17
Table of Contents
On July 31, 2009, the Company and the syndicate of lenders participating in the Facility entered
into Amendment No. 1 to the Facility. This amendment, effective as of the date of execution,
modified the covenant on maximum indebtedness to EBITDA by deleting that covenant and substituting
in its place a covenant on minimum EBITDA. In addition, the lenders and the Company agreed to
modify the definition of EBITDA for this covenant by now allowing the Company to add back non-cash
charges to EBITDA.
The Facility also contains certain financial covenants which (a) require a minimum amount of
modified EBITDA and (b) require a minimum fixed charge coverage ratio of 1.7x. At December 31,
2009, the Company was in compliance with the minimum modified EBITDA and had a fixed charge
coverage ratio of 6.47x. The Facility also contains customary representations and warranties and
events of default.
During 2009, the Company applied $13.9 million of cash toward capital expenditures. These
expenditures were funded by cash from operations.
In 2008, the Company issued 1,301,961 shares of common stock in connection with the acquisitions of
Aerex and Chen-Tech.
During the years ending December 31, 2008 and 2009, the Company received $0.215 million and $0.015
million, respectively, from the exercise of employee stock options.
Given the Companys ability to pass along raw material price increases to its customers,
inflation has not had a material effect upon the Company during the period covered by this report.
Given the rising demand for the products manufactured by the Company, and the prospects for
increases in raw material costs and possible energy cost escalation, the Company cannot determine
at this time if there will be any significant impact from inflation in the foreseeable future.
Contractual
Obligations Table
(Dollars in Millions)
(Dollars in Millions)
Less Than | More Than | |||||||||||||||
1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||
Senior Notes (1) |
$ | 5.715 | $ | 31.430 | $ | 31.430 | $ | 21.425 | ||||||||
Bank Facility |
| | | | ||||||||||||
Operating Leases |
.974 | 1.592 | 1.239 | 1.848 | ||||||||||||
Purchase Obligations (2) |
61.438 | 101.602 | | | ||||||||||||
Other Long-Term Obligations: |
||||||||||||||||
Pensions (3) |
7.456 | 26.806 | | | ||||||||||||
Postretirement Benefits (4) |
3.464 | 6.737 | 6.262 | 13.137 |
(1) | The Company expects to fund the payment of long-term debt through the
use of cash on hand, cash generated from operations, the reduction of working capital
and, if necessary, through access to the Facility. |
|
(2) | The purchase obligations relate primarily to raw material purchase orders
necessary to fulfill the Companys production backlog for the Companys products
along with commitments for energy supplies also necessary to fulfill the Companys
production backlog. There are no net settlement provisions under any of these
purchase orders nor is there any market for the underlying materials. |
|
(3) | The Companys estimated cash pension contribution is based upon the
calculation of the Companys independent actuary for 2010. There are no estimates
beyond 2012. |
|
(4) | The Companys cash expenditures for Postretirement Benefits have only been
projected out through the year 2019. |
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Table of Contents
Critical Accounting Policies
Deferred Income Taxes
The Company started 2008 with $2.1 million of domestic net operating loss (NOL) carryforwards
that were generated prior to its reorganization completed on April 30, 1993. These NOLs were
utilized by the Company to reduce taxable income in 2008. The Company has $3.7 million of NOL
carryforwards that were generated by its foreign operations in 2008 and 2009. These NOLs expire in
the years 2012 through 2014. The Company has total net deferred income tax assets of $31.7 million
as of December 31, 2009.
Pensions
The Company has noncontributory defined benefit pension plans (Plans) covering a number of its
employees. The Company contributed $8.955 million and $3.428 million, respectively, to the Plans
in 2008 and 2009. The Company intends to contribute $7.5 million, $11.8 million and $15 million to
the Plans in 2010, 2011 and 2012, respectively. The Company plans on funding those contributions
from cash on hand, cash generated from operations, working capital reductions, treasury stock
contributions and, if necessary, from the Facility. No estimates have been made for payments into
the Plans beyond 2012.
The Plans assets are held in a trust and are primarily invested in U.S. Government securities,
investment grade corporate bonds and marketable common stocks. The key assumptions the Company
considers with respect to the assets in the Plans and funding the liabilities associated with the
Plans are the discount rate, the long-term rate of return on Plans assets, the projected rate of
increase in compensation levels and the actuarial estimate of mortality of participants in the
Plans. The most sensitive assumption is the discount rate. For funding purposes, the Companys
independent actuaries assumed an annual long-term rate of return on the Plans assets of 7.95% and
8.05% for 2008 and 2009, respectively. For the ten-year period ending December 31, 2009, the
Company experienced an annual rate of return on the Plans assets of 3.31%.
The Company used a rate of 5.16% for its discount rate assumption for 2009, a decrease from the
6.05% rate used for 2008. An increase in the discount rate results in a decrease in the
accumulated benefit obligation at the measurement date which may also result in a decrease in the
additional minimum pension liability included as a credit to accumulated other comprehensive
income. Such an increase also results in an actuarial gain which is amortized to pension expense
in accordance with FASB ASC 715-30. A decrease in the discount rate will have the opposite effect
in the pension liability and pension expense. The Company bases its discount rate on long maturity
AA rated corporate debt securities. The Company cannot predict whether these interest rates will
increase or decrease in future years.
The Company cannot predict the level of interest rates in the future and correspondingly cannot
predict the future discount rate which will be applied to determine the Companys projected benefit
obligation. As demonstrated in the chart below, relatively small movements in the discount rate,
up or down, can have a significant impact on the Companys projected benefit obligation under the
Plans.
Projected Plan Benefit Obligation as of December 31, 2009 | ||||
(Dollars in Millions) | ||||
At 4.91% discount rate |
$ | 225.019 | ||
At 5.16% discount rate |
$ | 219.756 | ||
At 5.41% discount rate |
$ | 214.709 |
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Nor can the Company predict with any certainty what the actual rate of return will be for the
Plans assets. As demonstrated in the chart below, a modest change in the presumed rate of return
on the Plans assets will have a material impact upon the actual net periodic cost for the Plans.
Net Periodic Benefit for Year Ending December 31, 2010 | ||||
(Dollars in Millions) | ||||
7.80% expected return |
$ | 9.334 | ||
8.05% expected return |
$ | 8.954 | ||
8.30% expected return |
$ | 8.573 |
Fair Value Measurement of Pension Assets
FASB ASC 820-10, Fair Value Measurements and Disclosures, establishes a framework and provides
guidance on measuring the fair value of assets in a pension plan and how an employer should
disclose the same. The framework establishes a fair value hierarchy that prioritizes the inputs to
the valuation techniques used to measure fair value. The three levels of fair value hierarchy are
described as follows:
Level 1 | Quoted prices in active markets for identical assets or liabilities. |
||
Level 2 | Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities. |
||
Level 3 | Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities. |
The following table sets forth by level (dollars in millions), within the fair value hierarchy, the
Plans assets at fair value as of December 31, 2009:
Plans Assets | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
$ | 142.967 |
$ | 142.967 | | | $ | 142.967 |
Goodwill and Other Intangible Assets
Goodwill represents the cost of acquired net assets in excess of their fair market values.
Goodwill and other intangible assets with indefinite useful lives are not amortized but are tested
for impairment at least annually in accordance with the provisions of FASB ASC 350-20, Intangibles
Goodwill and Other. Intangible assets with estimable useful lives are amortized over their
respective estimated useful lives and also reviewed at least annually for impairment.
In accordance with ASC 350-20, a two-step impairment test is required to identify potential
goodwill impairment and measure the amount of the goodwill impairment loss to be recognized. In
the first step, the fair value of each reporting unit is compared to its carrying value to
determine if the goodwill is impaired. If the fair value of the reporting unit exceeds the
carrying value of the net assets assigned to that unit, then goodwill is not impaired and the
second step is not required. If the carrying value of the net assets assigned to the reporting
unit exceeds its fair value, then the second step is performed in order to determine the implied
fair value of the reporting units goodwill and an impairment loss is recorded for an amount equal
to the difference between the implied fair value and the carrying value of the goodwill.
20
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For the purpose of goodwill analysis, the Company has only one reporting segment, as defined by ASC
350-20. Goodwill of $37.6 million represents the excess of the purchase price over the fair value
of identifiable tangible and intangible net assets relating to business acquisitions. Goodwill
increased significantly in 2008 due to the acquisitions of Aerex and Chen-Tech. It is an asset
with an indefinite life
and therefore is not amortized to expense, but is subject to annual impairment testing. The
Company tests the goodwill for impairment at least annually by fair value impairment testing. The
Companys assessment of fair value used in the annual impairment testing takes into account a
number of factors including EBITDA and revenue multiples of transactions in the Companys industry
as well as fair market value multiples of transactions of similarly situated enterprises. No
impairments were recognized in 2007, 2008 or 2009. Should goodwill become impaired in the future,
the amount of impairment will be charged to SG&A expense. The Company has $19.5 million of
amortizable customer relationships included in other intangible assets that are being amortized
over 50 years with annual amortization of $0.4 million.
New Accounting Pronouncements
Effective July 1, 2009, the Company adopted FASB ASC 105-10, Generally Accepted Accounting
Principles Overall. ASC 105-10 establishes the FASB ASC as the source of authoritative
accounting principles recognized by the FASB to be applied in the preparation of financial
statements in conformity with U.S. generally accepted accounting principles (GAAP). The Company
has updated GAAP referencing for this report. The FASB Codification had no impact on financial
reporting of the Company.
In December 2007, the FASB issued guidance for accounting and reporting of noncontrolling interests
in financial statements, which is included in ASC 810-10, Consolidation Overall. The objective
of ASC 810-10 is to improve the financial information provided in consolidated financial
statements. ASC 810-10 changes the way the consolidated income statement is presented, establishes
a single method of accounting for changes in a parents ownership interest in a subsidiary that do
not result in deconsolidation, requires that a parent recognize a gain or loss in net income when a
subsidiary is deconsolidated, and expands disclosures in the consolidated financial statements in
order to clearly identify and distinguish between the interests of the parents owners and the
interest of the noncontrolling owners of a subsidiary. The Company adopted ASC 810-10 effective
January 1, 2009. ASC 810-10 modified the manner in which the Company reported on the
noncontrolling interest in ZKM as the noncontrolling interest has been classified as a component of
equity.
On December 30, 2008, the FASB issued guidance related to employers disclosures regarding
postretirement benefit plan assets, which is included in ASC 715-20, Defined Benefit Plans
General. ASC 715-20 provides additional guidance on employers disclosures about plan assets of a
defined benefit pension or other postretirement plan. The Company adopted ASC 715-20 in fiscal
year 2009. The disclosure requirements are annual and do not apply to interim financial
statements.
Effective June 30, 2009, the Company adopted FASB ASC 855-10, Subsequent Events Overall. ASC
855-10 establishes standards for the accounting for and the disclosing of subsequent events. ASC
855-10 introduces new terminology, defines a date through which management must evaluate subsequent
events, and lists the circumstances under which an entity must recognize and disclose events or
transactions occurring after the balance sheet date.
The Company evaluated its December 31, 2009 financial statements for subsequent events through
March 4, 2010, the date the financial statements were available to be issued. The Company is not
aware of any subsequent events which would require recognition or disclosure in the financial
statements.
21
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company believes that its exposure to market risk related to changes in foreign currency
exchange rates and trade accounts receivable is immaterial.
Item 8. Financial Statements and Supplementary Data
The response to Item 8. Financial Statements and Supplementary Data incorporates by reference the
information listed in the consolidated financial statements and accompanying schedules beginning on
page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Grant Thornton LLP have been the auditors of the financial statements of the Company for the fiscal
years ended December 31, 2007, 2008 and 2009. It is anticipated that representatives of Grant
Thornton LLP will be present at the 2010 Annual Meeting, will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate questions raised at the
2010 Annual Meeting or submitted to them in writing before the 2010 Annual Meeting.
Grant Thornton LLP has informed the Company that it does not have any direct financial interest in
the Company and that it has not had any direct connection with the Company in the capacity of
promoter, underwriter, director, officer or employee.
As is customary, auditors for the fiscal year ending December 31, 2010 will be appointed by the
Audit Committee and ratified by the stockholders and by the Board of Directors at their meeting
immediately following the 2010 Annual Meeting.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The disclosure controls and procedures of the Company are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be
disclosed by the Company is accumulated and communicated to the Companys management, including its
principal executive and principal financial officers to allow timely decisions regarding
disclosure.
Under the direction of the principal executive officer and the principal financial officer, the
Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2009. Based on that evaluation, the
chief executive officer and the chief financial officer have concluded that the Companys
disclosure controls and procedures were effective.
There were no significant changes in the Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of managements evaluation, including
any corrective actions with regard to significant deficiencies and material weaknesses.
22
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Managements Annual Report on Internal Control over Financial Reporting
The Companys management is responsible for establishing and maintaining adequate internal controls
over the financial reporting of the Company. The Companys management, under the supervision and
with the participation of the Companys principal executive officer and principal financial
officer, has evaluated the effectiveness of the Companys internal controls over financial
reporting based upon the framework in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, as of
December 31, 2009, management concluded that the Companys internal controls over financial
reporting are operating effectively. Grant Thornton LLP, an independent registered public
accounting firm, has issued an attestation report on the Companys internal control over financial
reporting, which is included herein.
Item 9B. Other Information
None.
23
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders of
Ladish Co., Inc.
Ladish Co., Inc.
We have audited Ladish Co., Inc.s (a Wisconsin Corporation) internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Ladish Co., Inc.s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Managements Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on Ladish Co., Inc.s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Ladish Co., Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, based on criteria established in Internal
Control-Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Ladish Co., Inc. and subsidiaries as of
December 31, 2009 and 2008, and the related statements of operations, stockholders equity, and
cash flows for the three years then ended and our report dated March 4, 2010 expressed an
unqualified opinion.
GRANT THORNTON LLP
Milwaukee, Wisconsin
March 4, 2010
Milwaukee, Wisconsin
March 4, 2010
24
Table of Contents
PART III
Item 10. Directors and Executive Officers of the Registrant
Certain information called for by this Item is incorporated herein by reference to the sections
entitled Section 16(a) Beneficial Ownership Reporting Compliance, Audit Committee and
Independent/Nominating Committee in the Proxy Statement for the 2010 Annual Meeting of
Stockholders.
The list of Executive Officers in Part I, Item 1. Business, paragraph captioned Executive Officers
of the Registrant is incorporated by reference. The list of Directors of the Company is as
follows:
Name | Age | |||
Lawrence W. Bianchi |
68 | |||
James C. Hill |
61 | |||
Leon A. Kranz |
70 | |||
Wayne E. Larsen |
55 | |||
J. Robert Peart |
47 | |||
John W. Splude |
64 | |||
Gary J. Vroman |
50 |
Other information required by Item 401 of Regulation S-K is as follows:
Lawrence W. Bianchi, 68. Director since 1998. Mr. Bianchi in 1993 retired as the Managing Partner
of the Milwaukee, Wisconsin office of KPMG LLP. From 1994 to 1998, Mr. Bianchi served as CFO of
the law firm of Foley & Lardner LLP. Mr. Bianchis principal occupation is investments.
Lawrence C. Hammond, 62. Mr. Hammond has served as Vice President, Human Resources since January
1994. Prior to that time he had served as Director of Industrial Relations at the Company and he
had been Labor Counsel at the Company. Mr. Hammond has been with the Company since 1980.
James C. Hill, 61. Director since 2003. Mr. Hill was Chairman and Chief Executive Officer of
Vision Metals, Inc., a steel tubing producer, from 1997 to 2001. Prior to that period he was
Corporate Vice President of Quanex Corporation, a NYSE public company and President of its Tube
Group from 1983 to 1997.
Leon A. Kranz, 70. Director since 2001. Mr. Kranz was formerly President and Chief Executive
Officer of Weber Metals, Inc., a Paramount, California based metals processor, a position he held
for more than ten years.
Wayne E. Larsen, 55. Director since 2009 and previously a director from 1997 to 2003. Since 1995
Mr. Larsen has been Vice President Law/Finance and Secretary of the Company. He served as General
Counsel and Secretary since 1989 after joining the Company as corporate counsel in 1981. Mr. Larsen
is a Trustee of the Ladish Co. Foundation and a Director of the South Shore YMCA of Milwaukee and
serves on the Advisory Board of U.S. Bank-Wisconsin.
J. Robert Peart, 47. Director since 2003. Mr. Peart is Managing Director for Guggenheim Aviation
Partners, LLC, a private investment concern since 2004. Prior to that period, he was Managing
Director of Residco, a transportation investment banking concern.
John W. Splude, 64. Director since 2004. Mr. Splude is Executive Chairman of HK Systems, Inc., an
automated material handling and logistics software provider, a position he has held for over ten
years. He is also a Director of Superior Die Cast and Ministry Health Care, a regent of Milwaukee
School of Engineering, and serves on the Advisory Board of U.S. Bank-Wisconsin.
25
Table of Contents
Randy B. Turner, 60. Mr. Turner has served as President of PCT since it was acquired by the
Company in January 2000. Prior to joining the Company, Mr. Turner served as President of the
corporate predecessor to PCT.
Gary J. Vroman, 50. Mr. Vroman has served as President and Chief Executive Officer of the Company
since September 2009 after serving as President of Forging since January 1, 2008. Prior to that
time, he was Vice President, Sales and Marketing of Forging since December 1995. Mr. Vroman has
been with the Company since 1982. He is a Trustee of the Ladish Co. Foundation.
The Companys ethics code is reflected in its policies addressing i) conflict of interest, ii)
compliance with antitrust laws, iii) improper payments, iv) falsification of records, and v)
insider trading. These policies apply to all Company employees including the principal executive
officer, the principal financial officer, controller and members of the Board of Directors. On an
annual basis, the Company requires its key management personnel to certify their review and
compliance with these policies. A copy of the policies was filed as an exhibit to the Form 10-K on
March 25, 2003. The policies can also be found on the Companys website, www.ladishco.com.
Item 11. Executive Compensation
The information called for by this Item is incorporated herein by reference to the sections
entitled Executive Compensation and Other Matters, The Stock Option Plan, Pension Benefits,
Compensation of Directors, Employment Agreements, Compensation Committee Interlocks and
Insider Participation, and Compensation and Stock Option Committee Report of the Proxy Statement
for the 2010 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by this Item is incorporated herein by reference to the sections
entitled Voting Securities and Stockholders and The Stock Option Plan of the Proxy Statement
for the 2010 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
The information called for by this Item is incorporated herein by reference to the section entitled
Certain Relationships of the Proxy Statement for the 2010 Annual Meeting of Stockholders.
Item 14. Principal Accountant Fees and Services
The information called for by this Item is incorporated by reference to the section entitled Audit
Committee of the Proxy Statement for the 2010 Annual Meeting of Stockholders.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Exhibits. See the accompanying index to exhibits on page X-1 which is part of this report.
Financial Statements. See the accompanying index to financial statements and schedules on page F-1
which is a part of this report.
26
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LADISH CO., INC. | ||||||
By: | /s/ Wayne E. Larsen
|
|||||
March 4, 2010
|
Vice President Law/Finance & Secretary |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Signature | Title | Date | ||
/s/ Gary J. Vroman
|
Director, President and Chief Executive Officer (Principal Executive Officer) | March 2, 2010 | ||
/s/ Wayne E. Larsen
|
Director, Vice President Law/Finance & Secretary (Principal Financial and Accounting Officer) | March 2, 2010 | ||
/s/ Lawrence W. Bianchi
|
Director | March 2, 2010 | ||
/s/ James C. Hill
|
Director | March 2, 2010 | ||
/s/ Leon A. Kranz
|
Director | March 1, 2010 | ||
/s/ J. Robert Peart
|
Director | March 3, 2010 | ||
/s/ John W. Splude
|
Director | March 3, 2010 |
27
Table of Contents
INDEX TO FINANCIAL STATEMENTS
F-3 | ||||
F-4 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 | ||||
F-1
Table of Contents
THIS PAGE INTENTIONALLY LEFT BLANK
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Ladish Co., Inc.
Ladish Co., Inc.
We have audited the accompanying consolidated balance sheets of Ladish Co., Inc. (a Wisconsin
Corporation) and subsidiaries, collectively the Company as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders equity, and cash flows for each of the
three years in the period ended December 31, 2009. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Ladish Co., Inc. and subsidiaries as of December 31,
2009 and 2008, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2009 in conformity with accounting principles generally accepted
in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Ladish Co., Inc.s internal control over financial reporting as of December
31, 2009, based on criteria established in Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March
4, 2010 expressed an unqualified opinion on the effectiveness of internal control over financial
reporting.
GRANT THORNTON LLP
Milwaukee, Wisconsin
March 4, 2010
Milwaukee, Wisconsin
March 4, 2010
F-3
Table of Contents
Ladish Co., Inc.
Consolidated Balance Sheets
December 31, 2008 and 2009
(Dollars in Thousands Except Per Share Data)
(Dollars in Thousands Except Per Share Data)
2008 | 2009 | |||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and Cash Equivalents |
$ | 4,903 | $ | 19,917 | ||||
Accounts Receivable, Less Allowance of $84
and $75 |
78,673 | 59,382 | ||||||
Inventories |
129,307 | 92,697 | ||||||
Deferred Income Taxes |
6,780 | 5,144 | ||||||
Prepaid Expenses and Other Current Assets |
10,469 | 6,118 | ||||||
Total Current Assets |
230,132 | 183,258 | ||||||
Property, Plant and Equipment: |
||||||||
Land and Improvements |
6,414 | 6,905 | ||||||
Buildings and Improvements |
54,652 | 60,416 | ||||||
Machinery and Equipment |
229,310 | 240,352 | ||||||
Construction in Progress |
62,244 | 58,451 | ||||||
352,620 | 366,124 | |||||||
Less Accumulated Depreciation |
(153,351 | ) | (167,688 | ) | ||||
Net Property, Plant and Equipment |
199,269 | 198,436 | ||||||
Deferred Income Taxes |
19,880 | 26,522 | ||||||
Goodwill |
37,113 | 37,571 | ||||||
Other Intangible Assets, Net |
20,011 | 19,465 | ||||||
Other Assets |
3,061 | 4,262 | ||||||
Total Assets |
$ | 509,466 | $ | 469,514 | ||||
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
Ladish Co., Inc.
Consolidated Balance Sheets
December 31, 2008 and 2009
(Dollars in Thousands Except Per Share Data)
December 31, 2008 and 2009
(Dollars in Thousands Except Per Share Data)
2008 | 2009 | |||||||
Liabilities and Equity |
||||||||
Current Liabilities: |
||||||||
Accounts Payable |
$ | 37,748 | $ | 23,613 | ||||
Senior Bank Debt |
28,900 | | ||||||
Senior Notes |
| 5,714 | ||||||
Accrued Liabilities: |
||||||||
Pensions |
341 | 259 | ||||||
Postretirement Benefits |
3,540 | 3,464 | ||||||
Officers Deferred Compensation |
31 | 155 | ||||||
Wages and Salaries |
4,911 | 3,314 | ||||||
Taxes, Other Than Income Taxes |
304 | 289 | ||||||
Interest |
1,425 | 1,355 | ||||||
Profit Sharing |
1,898 | 611 | ||||||
Paid Progress Billings |
4,683 | 2,428 | ||||||
Other |
7,441 | 4,541 | ||||||
Total Current Liabilities |
91,222 | 45,743 | ||||||
Noncurrent Liabilities: |
||||||||
Senior Notes |
90,000 | 84,286 | ||||||
Pensions |
63,661 | 69,653 | ||||||
Postretirement Benefits |
29,716 | 30,215 | ||||||
Officers Deferred Compensation |
6,792 | 9,276 | ||||||
Other Noncurrent Liabilities |
3,998 | 4,220 | ||||||
Total Liabilities |
285,389 | 243,393 | ||||||
Stockholders Equity: |
||||||||
Common Stock-Authorized 100,000,000, Issued and
Outstanding
15,907,552 Shares at Each Date of $.01 Par Value |
159 | 159 | ||||||
Additional Paid-In Capital |
153,285 | 153,292 | ||||||
Retained Earnings |
139,284 | 145,378 | ||||||
Treasury Stock, 6,336 and 4,548 Shares, Respectively, of
Common Stock at Cost |
(46 | ) | (33 | ) | ||||
Accumulated Other Comprehensive Loss |
(69,271 | ) | (73,214 | ) | ||||
Total Stockholders Equity |
223,411 | 225,582 | ||||||
Noncontrolling Interest in Equity of Subsidiary |
666 | 539 | ||||||
Total Equity |
224,077 | 226,121 | ||||||
Total Liabilities and Equity |
$ | 509,466 | $ | 469,514 | ||||
See accompanying notes to consolidated financial statements.
F-5
Table of Contents
Ladish Co., Inc.
Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Data)
Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Net Sales |
$ | 424,631 | $ | 469,466 | $ | 349,832 | ||||||
Cost of Sales |
355,628 | 410,163 | 322,745 | |||||||||
Gross Profit |
69,003 | 59,303 | 27,087 | |||||||||
Selling, General and Administrative Expenses |
16,684 | 19,765 | 17,839 | |||||||||
Income from Operations |
52,319 | 39,538 | 9,248 | |||||||||
Other (Income) Expense: |
||||||||||||
Interest Expense |
2,528 | 1,971 | 5,050 | |||||||||
Other, Net |
(363 | ) | (683 | ) | 1,062 | |||||||
Income Before Income Tax Provision |
50,154 | 38,250 | 3,136 | |||||||||
Income Tax Provision (Benefit) |
17,798 | 5,876 | (2,894 | ) | ||||||||
Net Income |
32,356 | 32,374 | 6,030 | |||||||||
Noncontrolling Interest in Net Earnings (Loss) of Subsidiary |
68 | 169 | (64 | ) | ||||||||
Net Income Attributable to the Controlling Interest |
$ | 32,288 | $ | 32,205 | $ | 6,094 | ||||||
Earnings Per Share: |
||||||||||||
Basic |
$ | 2.22 | $ | 2.15 | $ | 0.38 | ||||||
Diluted |
$ | 2.22 | $ | 2.15 | $ | 0.38 |
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
Ladish Co., Inc.
Consolidated Statements of Equity
(Dollars in Thousands Except Per Share Data)
Non- | ||||||||||||||||||||||||||||||||
Accumulated | Controlling | |||||||||||||||||||||||||||||||
Common Stock | Additional | Treasury | Other | Interest in | ||||||||||||||||||||||||||||
Par | Paid-in | Retained | Stock, | Comprehensive | Equity of | |||||||||||||||||||||||||||
Shares | Value | Capital | Earnings | at Cost | Income (Loss) | Subsidiary | Total | |||||||||||||||||||||||||
Balance, December 31, 2006 |
14,605,591 | $ | 146 | $ | 115,688 | $ | 74,791 | $ | (2,962 | ) | $ | (34,993 | ) | $ | 635 | $ | 153,305 | |||||||||||||||
Comprehensive Net Income (Loss): |
||||||||||||||||||||||||||||||||
Net Income |
| | | 32,288 | | | 68 | 32,356 | ||||||||||||||||||||||||
Other Comprehensive Income: |
||||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustments |
| | | | | 6,139 | | 6,139 | ||||||||||||||||||||||||
Adjustment for Pension & Post-retirement Plans, Net of
Tax |
| | | | | (1,454 | ) | | (1,454 | ) | ||||||||||||||||||||||
Comprehensive Income |
37,041 | |||||||||||||||||||||||||||||||
Purchase of Subsidiary Shares |
| | | | | | (206 | ) | (206 | ) | ||||||||||||||||||||||
Issuance of Common Stock |
| | 8,972 | | 2,441 | | | 11,413 | ||||||||||||||||||||||||
Tax Effect Related to Stock Options |
| | 498 | | | | | 498 | ||||||||||||||||||||||||
Balance, December 31, 2007 |
14,605,591 | $ | 146 | $ | 125,158 | $ | 107,079 | $ | (521 | ) | $ | (30,308 | ) | $ | 497 | $ | 202,051 | |||||||||||||||
Comprehensive Net Income (Loss): |
||||||||||||||||||||||||||||||||
Net Income |
| | | 32,205 | | | 169 | 32,374 | ||||||||||||||||||||||||
Other Comprehensive Income: |
||||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustments |
| | | | | (7,519 | ) | | (7,519 | ) | ||||||||||||||||||||||
Adjustment for Unrealized Investment Losses, Net of Tax |
| | | | | (473 | ) | | (473 | ) | ||||||||||||||||||||||
Adjustment for Pension & Post-retirement Plans, Net of
Tax |
| | | | | (30,971 | ) | | (30,971 | ) | ||||||||||||||||||||||
Comprehensive Loss |
(6,589 | ) | ||||||||||||||||||||||||||||||
Issuance of Common Stock |
| | 655 | | 475 | | | 1,130 | ||||||||||||||||||||||||
Acquisition of Aerex |
45,750 | 1 | 940 | | | | | 941 | ||||||||||||||||||||||||
Acquisition of Chen-Tech |
1,256,211 | 12 | 31,808 | | | | | 31,820 | ||||||||||||||||||||||||
Pre-reorganization Deferred Tax Basis Adjustment |
| | (5,498 | ) | | | | | (5,498 | ) | ||||||||||||||||||||||
Tax Effect Related to Stock Options |
| | 222 | | | | | 222 | ||||||||||||||||||||||||
Balance, December 31, 2008 |
15,907,552 | $ | 159 | $ | 153,285 | $ | 139,284 | $ | (46 | ) | $ | (69,271 | ) | $ | 666 | $ | 224,077 | |||||||||||||||
Comprehensive Net Income (Loss): |
||||||||||||||||||||||||||||||||
Net Income |
| | | 6,094 | | | (64 | ) | 6,030 | |||||||||||||||||||||||
Other Comprehensive Income: |
||||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustments |
| | | | | 1,175 | | 1,175 | ||||||||||||||||||||||||
Adjustment for Unrealized Investment Gains, Net of Tax |
| | | | | 316 | | 316 | ||||||||||||||||||||||||
Adjustment for Pension & Post-retirement Plans, Net of
Tax |
| | | | | (5,434 | ) | | (5,434 | ) | ||||||||||||||||||||||
Comprehensive Income |
2,087 | |||||||||||||||||||||||||||||||
Purchase of Subsidiary Shares |
| | | | | | (63 | ) | (63 | ) | ||||||||||||||||||||||
Issuance of Common Stock |
| | 2 | | 13 | | | 15 | ||||||||||||||||||||||||
Tax Effect Related to Stock Options |
| | 5 | | | | | 5 | ||||||||||||||||||||||||
Balance, December 31, 2009 |
15,907,552 | $ | 159 | $ | 153,292 | $ | 145,378 | $ | (33 | ) | $ | (73,214 | ) | $ | 539 | $ | 226,121 | |||||||||||||||
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
Ladish Co., Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net Income Attributable to the Controlling Interest |
$ | 32,288 | $ | 32,205 | $ | 6,094 | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided by
(Used in) Operating Activities: |
||||||||||||
Depreciation |
11,134 | 13,320 | 15,339 | |||||||||
Amortization of Intangibles |
| | 546 | |||||||||
Non-Cash Deferred Compensation |
| (788 | ) | 527 | ||||||||
Deferred Income Taxes |
4,957 | 1,650 | (1,017 | ) | ||||||||
Noncontrolling Interest in Net Earnings (Loss) of
Subsidiary |
68 | 169 | (64 | ) | ||||||||
Gain on Purchase of Stock Noncontrolling Interest |
| | (23 | ) | ||||||||
Loss (Gain) on Disposal of Property, Plant and Equipment |
(443 | ) | (137 | ) | 308 | |||||||
Changes in Assets and Liabilities, Net of Acquired Businesses: |
||||||||||||
Accounts Receivable |
(4,161 | ) | 2,595 | 19,405 | ||||||||
Inventories |
(10,647 | ) | 8,969 | 36,666 | ||||||||
Other Assets |
(4,813 | ) | 3,759 | 2,246 | ||||||||
Accounts Payable and Accrued Liabilities |
7,432 | (11,607 | ) | (23,070 | ) | |||||||
Other Liabilities |
3,953 | (21,450 | ) | 1,331 | ||||||||
Net Cash Provided by Operating Activities |
39,768 | 28,685 | 58,288 | |||||||||
Cash Flows from Investing Activities: |
||||||||||||
Additions to Property, Plant and Equipment |
(38,096 | ) | (49,751 | ) | (13,883 | ) | ||||||
Proceeds from Sale of Property, Plant and Equipment |
703 | 468 | 88 | |||||||||
Purchase of ZKM Stock Noncontrolling Interest |
(215 | ) | | (37 | ) | |||||||
Cash Paid for Acquired Companies, Net of Cash Acquired |
| (40,271 | ) | | ||||||||
Proceeds from Aerex Acquisition Working Capital Adjustment |
| | 1,200 | |||||||||
Net Cash Used in Investing Activities |
(37,608 | ) | (89,554 | ) | (12,632 | ) | ||||||
Cash Flows from Financing Activities: |
||||||||||||
Borrowings from (Repayment of) Facility |
5,400 | 21,400 | (28,900 | ) | ||||||||
Issuance of Senior Notes |
| 50,000 | | |||||||||
Repayment of Senior Notes |
(6,000 | ) | (6,000 | ) | | |||||||
Repayment of Notes Payable |
| (4,610 | ) | | ||||||||
Retirement of Capital Leases |
| | (1,660 | ) | ||||||||
Deferred Financing Costs |
| (299 | ) | | ||||||||
Issuance of Common Stock |
289 | 215 | 15 | |||||||||
Net Cash (Used in) Provided by Financing
Activities |
(311 | ) | 60,706 | (30,545 | ) | |||||||
Effect of Exchange Rate Change on Cash and Cash Equivalents |
672 | (886 | ) | (97 | ) | |||||||
Increase (Decrease) in Cash and Cash Equivalents |
2,521 | (1,049 | ) | 15,014 | ||||||||
Cash and Cash Equivalents, Beginning of Period |
3,431 | 5,952 | 4,903 | |||||||||
Cash and Cash Equivalents, End of Period |
$ | 5,952 | $ | 4,903 | $ | 19,917 | ||||||
Supplemental Cash Flow Information: |
||||||||||||
Income Taxes Paid (Refunded) |
$ | 12,559 | $ | 8,417 | $ | (3,255 | ) | |||||
Interest Paid |
$ | 3,467 | $ | 3,734 | $ | 6,008 | ||||||
Non-Cash Supplemental Information: |
||||||||||||
Issuance of Stock for Acquisitions |
| $ | 32,761 | |
See accompanying notes to consolidated financial statements.
F-8
Table of Contents
Ladish Co., Inc.
Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Data)
(1) | Business Information |
Ladish Co., Inc. (the Company), headquartered in Cudahy, Wisconsin, engineers, produces and
markets high-strength, high technology forged and cast metal components for a wide variety of
load-bearing and fatigue-resisting applications in the jet engine, aerospace and industrial
markets, for both domestic and international customers. The Companys manufacturing site in
Irvine, California produces forgings for commercial and military jet engine applications. The
Companys manufacturing site in Albany, Oregon produces cast metal components, the Companys
manufacturing site in Stalowa Wola, Poland produces forgings for the industrial and aerospace
markets and its sites in Windsor, Connecticut and western Wisconsin are finished machining
operations. The Company operates as a single segment. Net sales to jet engine, aerospace and
industrial customers were approximately 56%, 24% and 20% in 2007, 51%, 26% and 23% in 2008 and
55%, 33% and 12% in 2009, respectively, of total company net sales. |
In 2007, 2008 and 2009, the Company had three customers that collectively accounted for
approximately 50%, 47% and 56%, respectively, of total Company net sales. Net sales to
Rolls-Royce were 28%, 23% and 26%, United Technologies 15%, 15% and 19% and General Electric
7%, 9% and 11% of total Company net sales for the respective years. |
U.S. exports accounted for approximately 49%, 46% and 46% of total Company net sales in 2007,
2008 and 2009, respectively, with exports to England constituting approximately 29%, 25% and
26%, respectively, of total Company net sales. |
As of December 31, 2009, approximately 45% of the Companys domestic employees were represented
by one of seven collective bargaining units. New collective bargaining agreements were
negotiated with six of these units during 2006 and negotiations with one unit were successfully
concluded in 2007. Internationally, the Company had approximately 500 employees in Poland as
of December 31, 2009, most of whom are represented by the Solidarity trade union. |
(2) | Summary of Significant Accounting Policies |
(a) | Consolidation |
The consolidated financial statements include the accounts of the Company and all of its
subsidiaries, including the results of operations of Aerex and Chen-Tech from their
respective acquisition dates. All significant intercompany accounts and transactions have
been eliminated in consolidation. |
The assets and liabilities of the Companys foreign subsidiary are translated at year-end
exchange rates and the related statements of earnings are translated at the average
exchange rates for the respective years. Gains or losses resulting from translating
foreign currencies are recorded as accumulated other comprehensive income or loss, a
separate component of stockholders equity. |
Gains or losses resulting from foreign currency transactions (transactions denominated in
a currency other than the Companys local currency) are included in net earnings, but are
not significant in the years presented. |
F-9
Table of Contents
(b) | Cash and Cash Equivalents |
||
Cash in excess of daily requirements is invested in marketable securities consisting of
commercial paper and money market instruments which mature in three months or less. Such
investments are deemed to be cash equivalents due to the high liquidity and short term
duration of such money market accounts. The Company maintains deposits in financial
institutions that consistently exceed the FDIC limit of $250,000. The Company has not
experienced any losses in such accounts and management believes the Company is not at
significant risk. |
|||
(c) | Outstanding Checks |
||
Outstanding payroll and accounts payable checks related to certain bank accounts are
recorded as accounts payable on the balance sheets. These checks amounted to $4,933 and
$105 as of December 31, 2008 and 2009, respectively. |
|||
(d) | Inventories |
||
Inventories are stated at the lower of cost, first-in, first-out (FIFO) basis, or market.
Inventory values include material and conversion costs. |
|||
Inventories for the years ended December 31, 2008 and 2009 consist of the following: |
December 31, | ||||||||
2008 | 2009 | |||||||
Raw Materials |
$ | 31,182 | $ | 18,038 | ||||
Work-In-Process and Finished |
100,019 | 77,209 | ||||||
131,201 | 95,247 | |||||||
Less Progress Payments |
(1,894 | ) | (2,550 | ) | ||||
Total Inventories |
$ | 129,307 | $ | 92,697 | ||||
(e) | Property, Plant and Equipment |
Additions to property, plant, and equipment are recorded at cost. Normal repair and
maintenance costs are expensed as incurred. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets, as follows: |
Land Improvements |
39 years | |||
Buildings and Improvements |
39 years | |||
Machinery and Equipment |
5 to 20 years |
Interest is capitalized in connection with construction of plant and equipment. Interest
capitalization ceases when the construction of the asset is substantially complete and the
asset is available for use. Interest capitalization was $795, $2,418 and $953 in 2007,
2008 and 2009, respectively. |
(f) | Goodwill and Other Intangible Assets |
||
Goodwill represents the cost of acquired net assets in excess of their fair market values.
Goodwill and other intangible assets with indefinite useful lives are not amortized but
are tested for impairment at least annually in accordance with the provisions of FASB ASC
350-20, Intangibles Goodwill and Other. Intangible assets with estimable useful lives
are amortized over their respective estimated useful lives and also reviewed at least
annually for impairment. |
F-10
Table of Contents
In accordance with ASC 350-20, a two-step impairment test is required to identify
potential goodwill impairment and measure the amount of the goodwill impairment loss to be
recognized. In the first step, the fair value of each reporting unit is compared to its
carrying value to determine if the goodwill is impaired. If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that unit, then
goodwill is not impaired and the second step is not required. If the carrying value of
the net assets assigned to the reporting unit exceeds its fair value, then the second step
is performed in order to determine the implied fair value of the reporting units goodwill
and an impairment loss is recorded for an amount equal to the difference between the
implied fair value and the carrying value of the goodwill. |
|||
For the purpose of goodwill analysis, the Company has only one reporting segment, as
defined by ASC 350-20. Goodwill amounted to $37,113 and $37,571 at December 31, 2008 and
2009, respectively. There was a significant increase in goodwill in 2008 due to the
acquisitions of Aerex and Chen-Tech. A $1,000 opening balance sheet deferred tax asset
related to the Chen-Tech acquisition was charged to Goodwill in lieu of taxes upon
realization in 2009. Goodwill has been subjected to fair value impairment tests in 2007,
2008 and 2009 and no impairments were recognized. |
|||
The Company has amortizable customer relationships of $20,011 and $19,465 at December 31,
2008 and 2009, respectively, included in other intangible assets that are being amortized
over 50 years with annual amortization of $400. The 2009 amortization expense of $546
included partial year expense of $146 from 2008. |
|||
The Company conducted its annual impairment analysis in the third quarter of 2009. The
fair value of the Company as measured by the Company market capitalization plus a control
premium exceeded its carrying value. The Company reviewed the analysis at year-end and
concluded it remained accurate. |
|||
The control premium that a third party would be willing to pay to obtain a controlling
interest in the Company was considered when determining fair value. Management considered
recent transactions with comparable companies in the industry, and possible synergies to a
market participant. In addition, factors such as the capital structure, the increase in
the Companys stock price and recent volatility in the Companys trading price prior to
December 31, 2009, were also considered. Management concluded there was a reasonable
basis for the excess of estimated fair value of the Company over its market
capitalization. |
|||
The estimated fair value requires judgment and the use of estimates by management.
Potential factors requiring assessment include a decline in the Companys stock price and
variance in results of operations from projections. Any of these potential factors may
cause the Company to re-evaluate goodwill during any quarter throughout the year. If an
impairment charge were to be taken for goodwill it would be a non-cash charge and would
not impact the Companys cash position or cash flows, however, such a charge could have a
material impact to equity and the statement of operations. |
|||
(g) | Fair Values of Financial Instruments |
||
The Company considers the carrying amounts of cash and cash equivalents, accounts
receivable and accounts payable to approximate fair value because of the short maturities
of these financial instruments. The fair values of the Senior Notes do not materially
differ from their carrying values. |
F-11
Table of Contents
(h) | Revenue Recognition |
Sales revenue is recognized when the title and risk of loss have passed to the customer,
there is pervasive evidence of an arrangement, delivery has occurred or the service has
been provided, the sale price is determinable and collectibility is reasonably assured.
This occurs at the time of shipment. Net sales include freight out as well as reductions
for returns and allowances, and sales discounts. Progress payments on contracts are
generally recognized as reductions of the related inventory costs. Progress payments in
excess of inventory costs are reflected as a liability. The Company does not recognize
revenue from the disposal of by-products. Any proceeds received from by-product disposal
are considered an offset to cost of sales. The allowance for doubtful accounts is based
on a review of sales reports, open deduction reports, trends in collections, historical
experience and existing economic conditions. Bad debt write-offs occur upon notice of
insolvency or other evidence of business closure. The Company has reviewed SEC Staff
Accounting Bulletin No. 104 and believes its revenue recognition policy to be in
compliance with FASB ASC 605-10-S99-1. |
(i) | Income Taxes |
Deferred income taxes are accounted for under the asset and liability method whereby
deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates. Deferred income tax provisions or
benefits are based on the change in the deferred tax assets and liabilities from period to
period. |
(j) | Use of Estimates |
The preparation of financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results will likely
differ from those estimates, but management believes such differences are not material. |
(k) | Reclassification |
Certain reclassifications have been made to the 2008 financial statements to conform with
the 2009 presentation. |
(l) | New Accounting Pronouncements |
Effective July 1, 2009, the Company adopted FASB ASC 105-10, Generally Accepted Accounting
Principles Overall. ASC 105-10 establishes the FASB ASC as the source of authoritative
accounting principles recognized by the FASB to be applied in the preparation of financial
statements in conformity with U.S. generally accepted accounting principles (GAAP). The
Company has updated GAAP referencing for this report. The FASB Codification had no impact
on financial reporting of the Company. |
In December 2007, the FASB issued guidance for accounting and reporting of noncontrolling
interests in financial statements, which is included in ASC 810-10, Consolidation
Overall. The objective of ASC 810-10 is to improve the financial information provided in
consolidated financial statements. ASC 810-10 changes the way the consolidated income
statement is presented, establishes a single method of accounting for changes in a
parents ownership interest in a subsidiary that do not result in deconsolidation,
requires that a parent recognize a gain or loss in net income when a subsidiary is
deconsolidated, and expands disclosures in the
consolidated financial statements in order to clearly identify and distinguish between the
interests of the parents owners and the interest of the noncontrolling owners of a
subsidiary. The Company adopted ASC 810-10 effective January 1, 2009. ASC 810-10 modified
the manner in which the Company reported on the noncontrolling interest in ZKM as the
noncontrolling interest has been classified as a component of equity. |
F-12
Table of Contents
On December 30, 2008, the FASB issued guidance related to employers disclosures regarding
postretirement benefit plan assets, which is included in ASC 715-20, Defined Benefit Plans
General. ASC 715-20 provides additional guidance on employers disclosures about plan
assets of a defined benefit pension or other postretirement plan. The Company adopted
ASC 715-20 in fiscal year 2009. The disclosure requirements are annual and do not apply
to interim financial statements. |
Effective June 30, 2009, the Company adopted FASB ASC 855-10, Subsequent Events Overall.
ASC 855-10 establishes standards for the accounting for and the disclosing of subsequent
events. ASC 855-10 introduces new terminology, defines a date through which management
must evaluate subsequent events, and lists the circumstances under which an entity must
recognize and disclose events or transactions occurring after the balance sheet date. The
Company is not aware of any subsequent events which would require recognition or
disclosure in the financial statements. |
(m) | Investments |
Investments in marketable securities are stated at fair value. Investments with no
readily determinable fair value are carried at cost. Fair value is determined using
quoted market prices at the end of the reporting period and, when appropriate, exchange
rates at that date. Unrealized gains and losses on marketable securities classified as
available-for-sale are recorded in accumulated other comprehensive income, net of tax. If
the decline in fair value is judged to be other-than-temporary, the cost basis of the
security is written down to fair value and the amount of the write-down is included in the
consolidated statements of operations. |
Investment securities are exposed to various risks including, but not limited to, interest
rate and market and credit risks. Due to the level of risks associated with certain
investment securities, it is at least reasonably possible that changes in the values of
investment securities will occur in the near term. |
The Company regularly reviews its investments to determine whether a decline in fair value
below the cost basis is other-than-temporary. To determine whether a decline in value is
other-than-temporary, the Company evaluates several factors, including current economic
environment, market conditions, operational and financial performance of the investee, and
other specific factors relating to the business underlying the investment, including
business outlook of the investee, future trends in the investees industry and the
Companys intent to carry the investment for a sufficient period of time for any recovery
in fair value. If a decline in value is deemed as other-than-temporary, the Company
records reductions in carrying values to estimated fair values, which are determined based
on quoted market prices if available or on one or more of the valuation methods such as
pricing models using historical and projected financial information, liquidation values,
and values of other comparable public companies. |
Investments, all of which are classified as available-for-sale, are stated at fair value
based on market quotes, when available. Unrealized gains and losses, net of deferred
taxes, are recorded as a component of other comprehensive income. |
F-13
Table of Contents
(3) | Debt |
On May 16, 2006, the Company sold $40,000 of Series B Notes in a private placement to certain
institutional investors. The Series B Notes are unsecured and bear interest at a rate of 6.14%
per annum with interest being paid semiannually. The Series B Notes have a ten-year duration
with the principal amortizing equally over the duration after the fourth year.
On September 2, 2008, the Company sold $50,000 of Series C Notes in a private placement to
certain institutional investors. The Series C Notes are unsecured and bear interest at a rate
of 6.41% per annum with interest being paid semiannually. The Series C Notes have a seven-year
duration with the principal amortizing equally over the duration after the third year.
The Companys Series B and Series C Notes contain financial covenants which (a) limit the
incurrence of certain additional debt; (b) require a certain level of consolidated adjusted net
worth; (c) require a minimum fixed charges coverage ratio; and (d) require a limited amount of
funded debt to consolidated cash flow. The covenant on incurrence of additional debt limits
funded debt to 60% of total capitalization. At December 31, 2009, funded debt at Ladish was at
21% of total capitalization. This covenant also limits priority debt to 20% of adjusted net
worth. Ladish had no priority debt at December 31, 2009. The covenant on adjusted net worth
requires a minimum of $112,829. At December 31, 2009, Ladish had $259,800 of adjusted net
worth. The covenant on fixed charges coverage ratio requires that consolidated cash flow to
fixed charges be a minimum of 2.00. The Companys fixed charges coverage ratio at December 31,
2009 was 4.77. The final covenant on funded debt to consolidated cash flow allows for a
maximum level of 4.00. At December 31, 2009, the Companys actual level was 2.91. The Note
Agreement for the Series B and Series C Notes also contains customary representations and
warranties and events of default.
At December 31, 2009, the Company was in compliance with all covenants in the Series B and
Series C Notes and the Facility.
In addition, the Company and a syndicate of lenders have entered into a revolving line of
credit (the Facility) which was most recently renewed on April 10, 2009. The Facility
consists of a $35,000 unsecured revolving line of credit which bears interest at a rate of
LIBOR plus 2.00% or at a base rate. At December 31, 2009, there were no borrowings under the
Facility and $35,000 of credit was available pursuant to the terms of the Facility. The
Facility matures on April 9, 2010.
On July 31, 2009, the Company and the syndicate of lenders participating in the Facility
entered into Amendment No. 1 to the Facility. This amendment, effective as of the date of
execution, modified the covenant on maximum indebtedness to EBITDA by deleting that covenant
and substituting in its place a covenant on minimum EBITDA. In addition, the lenders and the
Company agreed to modify the definition of EBITDA for this covenant by now allowing the Company
to add back non-cash charges to EBITDA.
The Facility also contains certain financial covenants which (a) require a minimum amount of
modified EBITDA and (b) require a minimum fixed charge coverage ratio of 1.7x. At December 31,
2009, the Company was in compliance with the minimum modified EBITDA and had a fixed charge
coverage ratio of 6.47x. The Facility also contains customary representations and warranties
and events of default.
F-14
Table of Contents
Long Term Debt Repayment Schedule | ||||||||||||
Senior Notes | ||||||||||||
Series B | Series C | |||||||||||
$ | 5,714 | May 16, 2010 |
||||||||||
$ | 5,715 | May 16, 2011 |
$ | 10,000 | September 2, 2011 | |||||||
$ | 5,715 | May 16, 2012 |
$ | 10,000 | September 2, 2012 | |||||||
$ | 5,715 | May 16, 2013 |
$ | 10,000 | September 2, 2013 | |||||||
$ | 5,715 | May 16, 2014 |
$ | 10,000 | September 2, 2014 | |||||||
$ | 5,715 | May 16, 2015 |
$ | 10,000 | September 2, 2015 | |||||||
$ | 5,711 | May 16, 2016 |
The total interest incurred by the Company amounted to $3,323, $4,389 and $6,003 in 2007,
2008 and 2009, respectively. Total interest rose in 2008 and 2009 as the Company incurred
additional long-term debt in 2008 to support the acquisitions of Aerex and Chen-Tech. The
capacity expansion programs at the Company resulted in higher interest capitalization in 2008.
The following table reflects the Companys treatment of interest for the years 2007, 2008 and
2009:
2007 | 2008 | 2009 | ||||||||||
Interest Expensed |
$ | 2,528 | $ | 1,971 | $ | 5,050 | ||||||
Interest Capitalized |
795 | 2,418 | 953 | |||||||||
Total |
$ | 3,323 | $ | 4,389 | $ | 6,003 | ||||||
(4) | Stockholders Equity |
(a) | Treasury Shares |
The treasury shares represent shares of common stock of the Company which the Company
repurchased on the open market. The value reflects the purchase price for those shares. |
(b) | Stock Option Plan |
The Company has a Long-Term Incentive Plan (the Stock Option Program) that covers
certain employees. Under the Stock Option Program, incentive stock options for up to
983,333 shares may be granted to employees of the Company of which 943,833 options have
been granted. These options expire ten years from the grant date. For the years 2008 and
2009, no options were granted under the Stock Option Program. As of December 31, 2009,
4,548 options granted under the Stock Option Program are fully vested and remain
outstanding. |
During 2007, 2008 and 2009, 33,500, 26,000 and 1,788 shares of common stock, respectively,
were issued from treasury stock for the exercise of stock options. The shares had a cost
of $7.32 per share. In 2007, 2008 and 2009, the difference of $44, $24 and $2,
respectively, between the cost of the shares released from treasury stock and the cash
proceeds from the exercise of stock options was credited to additional paid-in capital, a
component of stockholders equity. During the years ending December 31, 2007, 2008 and
2009, the Company received $289, $215 and $15, respectively, from the exercise of employee
stock options. |
The options outstanding were all granted and fully vested prior to the effective date of
FASB ASC 718-10, Compensation Stock Compensation Overall, and were accounted for under
the provisions of APB No. 25 Accounting for Stock Issued to Employees. As such, there
is no stock compensation expense for the remaining options. |
F-15
Table of Contents
A summary of options for 2007, 2008 and 2009 is as follows: |
2007 | 2008 | 2009 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Exercise | Exercise | Exercise | ||||||||||||||||||||||
Options | Price | Options | Price | Options | Price | |||||||||||||||||||
Outstanding at Beginning of Year |
65,836 | $ | 8.59 | 32,336 | $ | 8.57 | 6,336 | $ | 9.87 | |||||||||||||||
Granted |
| | | | | | ||||||||||||||||||
Forfeited |
| | | | | | ||||||||||||||||||
Exercised |
(33,500 | ) | 8.62 | (26,000 | ) | 8.25 | (1,788 | ) | 8.25 | |||||||||||||||
Outstanding at End of Year |
32,336 | 8.57 | 6,336 | 9.87 | 4,548 | 10.50 | ||||||||||||||||||
Exercisable at End of Year |
32,336 | $ | 8.57 | 6,336 | $ | 9.87 | 4,548 | $ | 10.50 | |||||||||||||||
The options outstanding and exercisable as of December 31, 2009 consist of the
following: |
Average | ||||||||||||||||||||
Weighted Average | Remaining | |||||||||||||||||||
Number of Options | Exercise Price | Contractual | ||||||||||||||||||
Range of Exercise Prices | Outstanding | Exercisable | Outstanding | Exercisable | LifeYears | |||||||||||||||
$10 to $15 |
4,548 | 4,548 | $ | 10.50 | $ | 10.50 | 1.38 |
(c) | Comprehensive Income |
Comprehensive income is defined as the sum of net income and all other non-owner changes
in equity. The components of the non-owner changes in equity, or accumulated other
comprehensive income (loss) were as follows (net of tax): |
December 31, | ||||||||
2008 | 2009 | |||||||
Foreign Currency Translation Adjustments |
$ | 1,604 | $ | 2,779 | ||||
Amounts in Accumulated Other Comprehensive Income that have
not yet been Recognized as: |
||||||||
Components of Net Periodic Benefit Cost: |
||||||||
Actuarial Loss |
(69,627 | ) | (74,567 | ) | ||||
Prior Service Cost |
(775 | ) | (1,269 | ) | ||||
Unrealized Investment Loss |
(473 | ) | (157 | ) | ||||
Accumulated Other Comprehensive Loss |
$ | (69,271 | ) | $ | (73,214 | ) | ||
(d) | Additional Paid-In Capital |
In 2008, the Company recognized a deferred tax liability of $5,498 which related to an IRS
audit adjustment for 1987. As the adjustment related to a time period prior to the
Companys reorganization in 1993, under fresh-start accounting, the adjustment is charged
to paid-in capital instead of the current tax provision. |
(5) | Research and Development |
Research and development expenses were $2,907, $3,061 and $2,725 in 2007, 2008 and 2009,
respectively. Customers reimbursed the Company for $1,175, $1,282 and $1,231 of research and
development expenses in 2007, 2008 and 2009, respectively. The expenses and related
reimbursement are included in cost of sales on the statements of operations. |
F-16
Table of Contents
(6) | Leases |
Certain office and warehouse facilities and equipment are leased under noncancelable operating
leases expiring on various dates through the year 2018. Rental expense was $370, $630 and
$1,225 in 2007, 2008 and 2009, respectively. |
Minimum lease obligations under noncancelable operating leases are as follows: |
2010 |
$ | 974 | ||
2011 |
836 | |||
2012 |
756 | |||
2013 |
637 | |||
2014 |
602 | |||
2015 and Thereafter |
1,848 | |||
Total |
$ | 5,653 | ||
Certain equipment were leased under noncancelable capital leases assumed as a part of the
Chen-Tech acquisition in 2008. The Company paid off these leases in 2009 and exercised the
purchase option for equipment. |
(7) | Income Taxes |
The Company utilized the remaining $2,142 of domestic net operating loss (NOL) carryforwards
to reduce taxable income in 2008. In addition, the Company recognized a fixed asset tax basis
adjustment that occurred prior to its reorganization resulting in a tax effected deferred tax
liability of $5,498 in 2008 with a corresponding reduction in paid-in capital. Pursuant to
FASB ASC 740-10, Income Taxes Overall in regards to uncertain tax provisions, the Company has
recorded a charge to income tax expense of $546 and $69 and has corresponding unrecognized tax
benefit reserves of $546 and $615 in 2008 and 2009, respectively, in connection with research
and development (R&D) tax credits recognized in those years. The reserves established are
10% of the R&D tax credit for each year and include any applicable penalties. The Company has
recorded $79 in interest costs with regard to the foregoing that is included in the 2009 charge
to income tax expense and corresponding reserve balance. The Company has total net deferred
income tax assets of $26,660 and $31,666 as of December 31, 2008 and 2009, respectively. |
The entire $615 of unrecognized tax benefits as of December 31, 2009 would impact the effective
tax rate if recognized. A reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows: |
Beginning Balance |
$ | 546 | ||
Additions for Tax Positions Related to the Current Year |
51 | |||
Additions for Tax Positions of Prior Years |
18 | |||
Ending Balance |
$ | 615 | ||
As of December 31, 2008, ZKM had net deferred Polish income tax assets totaling $2,060 which
included $1,799 of foreign economic zone credits and the net realizable value of $92 of NOL
carry-forwards that existed prior to Ladishs acquisition of ZKM. The foreign economic zone
credits expire in 2017 and the NOLs expired in 2009. Prior to 2007, the Company had determined
that it was not more likely than not that the ZKM NOLs would be utilized, therefore, a
valuation allowance was provided to reduce the benefit of the ZKM net deferred income tax
assets to zero. In 2007, in consideration of its recent earnings history and expectations of
future profitability, all of the valuation allowance against the net deferred tax assets was
reversed resulting in an $875 reduction in income tax expense. As of December 31, 2009, ZKM
has net deferred Polish income tax assets totaling $2,503 which include $1,951 of foreign
economic zone credits along with NOL carryforwards with a net realizable value of $35 and $677
in 2008 and 2009, respectively, that were generated by its ZKM and ZOPS operation. The NOL
carryforwards expire in the years 2012 through 2014. A valuation allowance has been
established against $115 of the foreign NOLs related to the ZOPS operation. |
F-17
Table of Contents
Realization of the domestic net deferred tax assets over time is dependent upon the Company
generating sufficient taxable income in future periods. In determining that realization of the
net deferred tax assets was more likely than not, the Company gave consideration to a number of
factors
including its recent earnings history, expectations for earnings in the future, the timing of
reversal of temporary differences, tax planning strategies available to the Company and the
expiration dates associated with NOL carryforwards. If, in the future, the Company determines
that it is no longer more likely than not that the domestic net deferred tax assets will be
realized, a valuation allowance will be established against all or part of the net deferred tax
assets through a charge to the income tax provision. |
Certain deferred tax liabilities associated with the acquisitions of Aerex and Chen-Tech have
been recorded against goodwill. |
Deferred taxes were classified in the consolidated balance sheets for the years ended December
31, 2008 and 2009 as follows: |
December 31, | ||||||||
2008 | 2009 | |||||||
Other Current Assets |
$ | 7,043 | $ | 6,434 | ||||
Other Noncurrent Assets |
39,804 | 47,964 | ||||||
Other Current Liabilities |
(263 | ) | (1,290 | ) | ||||
Other Noncurrent Liabilities |
(19,924 | ) | (21,442 | ) | ||||
Total Net Deferred Tax Assets |
$ | 26,660 | $ | 31,666 | ||||
The components of net deferred income tax assets and liabilities for the years ended
December 31, 2008 and 2009 are as follows: |
December 31, | ||||||||
2008 | 2009 | |||||||
Deferred Tax Assets: |
||||||||
Inventory Adjustments |
$ | 1,692 | $ | 1,491 | ||||
Accrued Employee Costs |
3,393 | 2,665 | ||||||
Operating Loss Carryforwards |
127 | 712 | ||||||
Pension Benefit Liabilities |
27,563 | 30,067 | ||||||
Postretirement Healthcare Benefit Liabilities |
13,302 | 13,472 | ||||||
Other |
34 | 4,816 | ||||||
46,111 | 53,223 | |||||||
Valuation Allowances |
(35 | ) | (115 | ) | ||||
Net Deferred Tax Assets |
46,076 | 53,108 | ||||||
Deferred Tax Liabilities: |
||||||||
Property, Plant and Equipment |
(19,416 | ) | (21,442 | ) | ||||
Net Deferred Tax Liabilities |
(19,416 | ) | (21,442 | ) | ||||
Total Net Deferred Tax Assets |
$ | 26,660 | $ | 31,666 | ||||
F-18
Table of Contents
A reconciliation of the Federal statutory tax rate to the Companys effective tax rate for
the years ended December 31, 2007, 2008 and 2009 is as follows: |
Years Ended December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Pre-tax Income |
$ | 50,154 | $ | 38,250 | $ | 3,136 | ||||||
Federal Tax at Statutory Rate of 35% |
$ | 17,554 | $ | 13,387 | $ | 1,098 | ||||||
State Tax, Net of Federal Effect |
2,176 | (144 | ) | 574 | ||||||||
Permanent Differences and Other, Net |
(104 | ) | (737 | ) | 458 | |||||||
Research & Development Credits |
| (3,582 | ) | (316 | ) | |||||||
Domestic Production Activities Deduction |
(717 | ) | (553 | ) | (21 | ) | ||||||
Reversal of Domestic Valuation Allowance |
| | (5,335 | ) | ||||||||
Establishment (Reversal) of Foreign
Valuation Allowance |
(875 | ) | 35 | 80 | ||||||||
Foreign Economic Zone Credits |
| (1,907 | ) | | ||||||||
Foreign Tax Rate Differential |
(236 | ) | (623 | ) | 569 | |||||||
Total Tax Provision (Benefit) |
$ | 17,798 | $ | 5,876 | $ | (2,893 | ) | |||||
Effective Tax Rate |
35.5 | % | 15.4 | % | (92.3 | )% | ||||||
The Domestic Production Activities Deduction is a statutory deduction limited to income arising
from qualified production activities based in the United States. |
The components of income tax expense (benefits) for the years ended December 31, 2007, 2008 and
2009 are as follows: |
2007 | ||||||||||||||||
Federal | State | Foreign | Total | |||||||||||||
Current |
$ | 9,553 | $ | 2,295 | $ | 75 | $ | 11,923 | ||||||||
Deferred |
5,112 | 1,098 | (875 | ) | 5,335 | |||||||||||
Charge in Lieu of Taxes Related to: |
||||||||||||||||
Goodwill |
35 | 5 | | 40 | ||||||||||||
Stock Options |
437 | 63 | | 500 | ||||||||||||
Total Income Tax Expense (Benefit) |
$ | 15,137 | $ | 3,461 | $ | (800 | ) | $ | 17,798 | |||||||
2008 | ||||||||||||||||
Federal | State | Foreign | Total | |||||||||||||
Current |
$ | 5,339 | $ | (506 | ) | $ | 14 | $ | 4,847 | |||||||
Deferred |
1,741 | 249 | (1,223 | ) | 767 | |||||||||||
Charge in Lieu of Taxes Related to: |
||||||||||||||||
Goodwill |
35 | 5 | | 40 | ||||||||||||
Stock Options |
194 | 28 | | 222 | ||||||||||||
Total Income Tax Expense (Benefit) |
$ | 7,309 | $ | (224 | ) | $ | (1,209 | ) | $ | 5,876 | ||||||
2009 | ||||||||||||||||
Federal | State | Foreign | Total | |||||||||||||
Current |
$ | (1,072 | ) | $ | 9 | $ | 2 | $ | (1,061 | ) | ||||||
Deferred |
3,111 | (4,593 | ) | (355 | ) | (1,837 | ) | |||||||||
Charge in Lieu of Taxes Related to: |
||||||||||||||||
Goodwill |
| | | | ||||||||||||
Stock Options |
4 | 1 | | 5 | ||||||||||||
Total Income Tax Expense (Benefit) |
$ | 2,043 | $ | (4,583 | ) | $ | (353 | ) | $ | (2,893 | ) | |||||
F-19
Table of Contents
The Company has not provided additional U.S. income taxes on $6,662 of undistributed
earnings of its Polish subsidiary, ZKM, included in stockholders equity. Such earnings could
become taxable upon the sale or liquidation of ZKM or upon dividend repatriation. The
Companys intent is for such earnings to be reinvested by ZKM or to be repatriated only when it
would be tax effective through the utilization of foreign tax credits. |
The Company is currently being audited by the State of Wisconsin for tax years 2005-2008. The
Company has not been notified of any other audit of its U.S. or state tax returns. Federal
returns for the years 2006-2009 are still open. |
(8) | Pensions and Postretirement Benefits |
The Company has noncontributory defined benefit pension plans (Plans) covering a number of
its employees. Plans covering salaried and management employees provide pension benefits that
are based on the highest five consecutive years of an employees compensation during the last
ten years prior to retirement. Plans covering hourly employees and union members generally
provide benefits of stated amounts for each year of service. The Companys funding policy is
to contribute annually an amount equal to or greater than the minimum amount required under the
Employee Retirement Income Security Act of 1974. The Company contributed $8,955 and $3,428 to
the Plans in 2008 and 2009, respectively, and the Company expects to contribute $7,456, $11,761
and $15,045 in 2010, 2011 and 2012, respectively, to the Plans. The Plans assets are
primarily invested in U.S. Government securities, investment grade corporate bonds and
marketable common stocks. The Plans may hold shares of the Companys common stock, which
comprise less than ten percent of any individual plans total assets. The market value of
Company shares held in all Plans as of December 31, 2008 and 2009 total $4,692 and $5,099,
respectively. On September 10, 2008, the Company contributed 38,788 shares of the Company with
a market value of $915 to the Plans. |
A summary of the Plans asset allocation at December 31, 2008 and 2009 is as follows: |
December 31, | ||||||||
Asset Category | 2008 | 2009 | ||||||
Fixed Income Securities |
54.5 | % | 54.4 | % | ||||
Equity Securities |
39.0 | % | 44.4 | % | ||||
Cash |
6.5 | % | 1.2 | % | ||||
Total |
100.0 | % | 100.0 | % | ||||
The Plans target asset allocation percentages are fixed income 50% and equities 50%. The
variance from the target in 2009 was due to the decline in the U.S. equity market in 2008. |
In addition to pension benefits, a number of the Companys employees are provided certain
postretirement healthcare and life insurance benefits. The employees may become eligible for
these benefits when they retire. The Company accrues, as current costs, the future lifetime
retirement benefits for both active and retired employees and their dependents. Steps have
been taken by the Company to reduce the amount of the future obligation for pensions and
postretirement healthcare benefits of future retirees by capping the amount of funds payable on
behalf of the retirees. |
The benefits estimated to be paid in the next five years for the pension plans range between
$15,900 and $16,500 per year and for years six through ten in aggregate total $76,100. For
postretirement healthcare and life insurance benefits, the estimated benefit payments over the
next five years approximate $3,300 per year and $13,100 in aggregate for years six through ten. |
F-20
Table of Contents
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was
enacted. In May 2004, the FASB issued ASC 715-60, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 in
response to the new law which may provide a federal subsidy to sponsors of retiree healthcare
benefit plans. The Company has concluded that certain benefits provided by its postretirement
benefit plan are actuarially equivalent to Medicare Part D under the Act and has filed refund
requests with the Claims Management Services, a division of the Health and Human Services
Department. Refunds of $169 and $274 have been received in 2008 and 2009, respectively. |
Certain officers have deferred compensation agreements (the Officers Plan) which, upon
retirement, provide them with, among other things, supplemental pension and other
postretirement benefits. An accumulated unfunded liability of $6,823 and $9,431 as of December
31, 2008 and 2009, respectively, has been recorded under these agreements as actuarially
determined. The expense was $440, $552 and $662 in 2007, 2008 and 2009, respectively. |
The Company has established a Rabbi Trust for the beneficiaries of the Officers Plan to fund a
portion of the benefits earned under the Officers Plan. The Rabbi Trust does not hold any
Company stock and is considered in the calculations determined by the actuary. The Rabbi Trust
had assets of $217 and $175 as of December 31, 2008 and 2009, respectively, and are included in
other assets on the balance sheets. The investments are held on the balance sheet and are
considered available-for-sale securities. The unrealized gain or loss on these investments is
recognized as a component of other comprehensive income. |
Fair Value Measurement of Pension Assets |
FASB ASC 820-10, Fair Value Measurements and Disclosures, establishes a framework and provides
guidance on measuring the fair value of assets in a pension plan and how an employer should
disclose the same. The framework establishes a fair value hierarchy that prioritizes the
inputs to the valuation techniques used to measure fair value. The three levels of fair value
hierarchy are described as follows: |
Level 1 | Quoted prices in active markets for identical assets or liabilities. |
||
Level 2 | Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities. |
||
Level 3 | Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities. |
The following table sets forth by level, within the fair value hierarchy, the Plans assets at
fair value as of December 31, 2009: |
Plans Assets | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
$ |
142,967 | $ | 142,967 | | | $ | 142,967 |
F-21
Table of Contents
The following is a reconciliation of the change in benefit obligation and Plans assets for the
years ended December 31, 2008 and 2009: |
Pension & Officers | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
Change in Benefit Obligation: |
||||||||||||||||
Projected Benefit Obligation at Beginning of Yr. |
$ | 204,496 | $ | 204,035 | $ | 35,454 | $ | 33,256 | ||||||||
Service Cost |
891 | 1,346 | 154 | 190 | ||||||||||||
Interest Cost |
11,998 | 11,856 | 2,051 | 1,903 | ||||||||||||
Amendments |
402 | 1,229 | | | ||||||||||||
Actuarial (Gains) Losses |
2,684 | 17,887 | (274 | ) | 1,835 | |||||||||||
Benefits Paid |
(16,436 | ) | (16,597 | ) | (5,956 | ) | (5,912 | ) | ||||||||
Participants Contributions |
| | 1,827 | 2,407 | ||||||||||||
Projected Benefit Obligation at End of Yr. |
$ | 204,035 | $ | 219,756 | $ | 33,256 | $ | 33,679 | ||||||||
Change in Plans Assets: |
||||||||||||||||
Plans Assets at Fair Value at Beginning of Yr. |
$ | 181,100 | $ | 136,472 | $ | | $ | | ||||||||
Actual Return on Plans Assets |
(37,310 | ) | 19,478 | | | |||||||||||
Company Contributions |
9,118 | 3,614 | 3,962 | 3,505 | ||||||||||||
Benefits Paid |
(16,436 | ) | (16,597 | ) | (5,956 | ) | (5,912 | ) | ||||||||
Participants Contributions |
| | 1,994 | 2,407 | ||||||||||||
Plans Assets at Fair Value at End of Yr. |
$ | 136,472 | $ | 142,967 | $ | | $ | | ||||||||
Funded Status of Plans |
$ | (67,563 | ) | $ | (76,789 | ) | $ | (33,256 | ) | $ | (33,679 | ) | ||||
Pension & Officers | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
Plans with Benefit Obligations in Excess of
Plan Assets: |
||||||||||||||||
Projected Benefit Obligation |
$ | 204,035 | $ | 219,756 | $ | 33,256 | $ | 33,679 | ||||||||
Accumulated Benefit Obligation |
197,930 | 211,461 | | | ||||||||||||
Plan Assets |
136,472 | 142,967 | | | ||||||||||||
Plans with Plan Assets in Excess of Benefit Obligations: |
||||||||||||||||
Projected Benefit Obligation |
$ | | $ | | $ | | $ | | ||||||||
Accumulated Benefit Obligation |
| | | | ||||||||||||
Plan Assets |
| | | | ||||||||||||
Weighted Average Assumptions: |
||||||||||||||||
Discount Rate |
6.05 | % | 5.16 | % | 6.05 | % | 5.16 | % | ||||||||
Rate of Increase in Compensation Levels |
3.00 | % | 3.00 | % | | | ||||||||||
Expected Long-Term Rate of Return on Assets |
7.95 | % | 8.05 | % | | |
The total accumulated pension benefit obligation for the Plans is $197,930 and $211,461 at
December 31, 2008 and 2009, respectively. All of the individual Plans and the Officers Plan
have accumulated benefit obligations exceeding the fair value of the Plans assets at December
31, 2009. |
F-22
Table of Contents
Pension & Officers | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
Amounts Recognized in the Consolidated
Balance Sheets: |
||||||||||||||||
Other Assets |
$ | 217 | $ | 175 | $ | | $ | | ||||||||
Accrued Liabilities Postretirement |
| | (3,540 | ) | (3,464 | ) | ||||||||||
Accrued Liabilities Officers Deferred Comp. |
(31 | ) | (155 | ) | | | ||||||||||
Noncurrent Liabilities Pensions |
(60,957 | ) | (67,533 | ) | | | ||||||||||
Noncurrent Liabilities Postretirement |
| | (29,716 | ) | (30,215 | ) | ||||||||||
Officers Deferred Compensation |
(6,792 | ) | (9,276 | ) | | | ||||||||||
Net Amount Recognized |
$ | (67,563 | ) | $ | (76,789 | ) | $ | (33,256 | ) | $ | (33,679 | ) | ||||
The amounts in accumulated other comprehensive loss that have not yet been recognized as
components of net periodic benefit cost at December 31, 2009 are as follows: |
Pension & Officers | Postretirement | |||||||
Benefits | Benefits | |||||||
Prior Service Cost |
$ | 2,014 | $ | 102 | ||||
Net Loss |
119,610 | 4,668 | ||||||
Total |
$ | 121,624 | $ | 4,770 | ||||
The amounts in accumulated other comprehensive loss that are expected to be recognized as
components of net periodic benefit cost during 2010 are as follows: |
Pension & Officers | Postretirement | |||||||
Benefits | Benefits | |||||||
Prior Service Cost |
$ | 490 | $ | 14 | ||||
Net Loss |
8,170 | 101 | ||||||
Total |
$ | 8,660 | $ | 115 | ||||
The components of the net periodic benefit costs for the years ended December 31, 2007,
2008 and 2009 are: |
Pension & Officers Benefits | Postretirement Benefits | |||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
Service Cost-Benefit Earned
During the Period |
$ | 876 | $ | 891 | $ | 1,346 | $ | 149 | $ | 154 | $ | 190 | ||||||||||||
Interest Cost on Projected
Benefit Obligation |
11,267 | 11,998 | 11,856 | 2,028 | 2,051 | 1,903 | ||||||||||||||||||
Expected Return on Pension Assets |
(15,529 | ) | (15,713 | ) | (13,265 | ) | | | | |||||||||||||||
Net Amortization and Deferral |
3,762 | 3,631 | 5,273 | 18 | 4 | 5 | ||||||||||||||||||
Prior Service Cost |
413 | 400 | 390 | 14 | 14 | 14 | ||||||||||||||||||
Net Periodic Benefit Cost |
$ | 789 | $ | 1,207 | $ | 5,600 | $ | 2,209 | $ | 2,223 | $ | 2,112 | ||||||||||||
F-23
Table of Contents
Assumptions used in the determination of net periodic benefit costs for these years are: |
Pension & Officers Benefits | Postretirement Benefits | |||||||||||||||||||||||
2007 | 2008 | 2009 | 2007 | 2008 | 2009 | |||||||||||||||||||
Discount Rate |
5.68 | % | 6.11 | % | 6.05 | % | 5.68 | % | 6.11 | % | 6.05 | % | ||||||||||||
Rate of Increase in
Compensation Levels |
3.00 | % | 3.00 | % | 3.00 | % | | | | |||||||||||||||
Expected Long-Term Rate of
Return on Assets |
8.90 | % | 8.90 | % | 7.95 | % | | | |
Assumed healthcare cost trend rates have a significant effect on the amounts reported for
the postretirement healthcare plans. The Company assumes annual increases of 0% on life
insurance, 7% on pre-65 healthcare and 5% on post-65 healthcare. A one-percentage-point change
in assumed healthcare cost trend rates would have the following effects: |
1% | 1% | |||||||
Increase | Decrease | |||||||
Effect on Total of Service and Interest Cost Components |
$ | 92 | $ | (82 | ) | |||
Effect on Postretirement Healthcare Benefit Obligation |
$ | 1,660 | $ | (1,486 | ) |
As a result of union labor renegotiations finalized during 2000, the benefits in certain
Company sponsored pension plans were frozen and replaced with comparable benefits in national
multi-employer plans not administered by the Company. The Company contributed $2,582 and
$2,291 to these plans during 2008 and 2009, respectively. Should the Company cease to
participate in these plans it could be subject to a withdrawal liability. |
ZKM sponsors an unfunded retirement plan and the Company has estimated ZKMs liability for this
plan to be approximately $3,044 and $2,379 at December 31, 2008 and 2009, respectively. The
Company has included ZKMs estimated liability in the pension liability in the consolidated
balance sheets. |
(9) | Deferred Compensation |
As a part of the total compensation program at the Company, a number of nonqualified plans have
been adopted which entail a portion of deferred compensation. For the individuals
participating in these deferred compensation programs, the deferred portion of their salary
and/or incentive pay has been placed into a Rabbi Trust for the benefit of those individuals
until such time as the assets are payable pursuant to the terms of the deferred compensation
programs. In the event of a liquidation of the assets of the Company, the assets placed in the
Rabbi Trusts are subject to the general claims of creditors of the Company. The deferred
compensation assets held in the Rabbi Trusts amounted to $2,461 and $3,723 as of December 31,
2008 and 2009, respectively, and are included as a part of other assets on the consolidated
balance sheets of the Company. The obligation to release these assets to participating
individuals is reflected as a part of other noncurrent liabilities on the consolidated balance
sheets of the Company. The investments are held on the balance sheet and are considered
available-for-sale securities. The unrealized gain (loss) on the Rabbi Trust assets amounted
to $(787) and $526 in 2008 and 2009, respectively, and is recorded net of tax as other
comprehensive income on the balance sheets. |
F-24
Table of Contents
(10) | Profit Sharing |
Forging has a profit sharing program in which substantially all of the employees are eligible
to participate. The profit sharing payout is derived from a formula based on net income and is
payable no later than February 15th of the subsequent year. The expense was $2,759,
$1,517 and $350 in 2007, 2008 and 2009, respectively. PCT has a profit sharing program in
which all employees are eligible to participate. The profit sharing pool is calculated based
on various internal operating measurements. The expense was $553, $368 and $261 in 2007, 2008
and 2009, respectively. For
Stowe, a profit sharing program for all employees had an expense of $158, $64 and $0 in 2007,
2008 and 2009, respectively. Profit sharing at Aerex and Chen-Tech for 2008 was provided by
the former owners of each business. In 2009, Aerex and Chen-Tech did not pay profit sharing. |
(11) | Commitments and Contingencies |
(a) | The Company is involved in various stages of investigation relative to
environmental protection matters relating to various waste disposal sites. The potential
costs related to such matters and the possible impact thereof on future operations are
uncertain due in part to uncertainty as to the extent of the pollution, the complexity of
laws and regulations and their interpretations, the varying costs and effectiveness of
alternative cleanup technologies and methods, and the questionable level of the Companys
involvement. The Company has an accrual of $300 at December 31, 2009, included in other
noncurrent liabilities on the consolidated balance sheets of the Company, for potential
losses related to these matters. The Company does not anticipate such losses will have a
material impact on the financial statements beyond the aforementioned provisions. |
(b) | The Company has been named as a defendant in a number of asbestos cases in
Mississippi, six cases in Illinois, one case in Wisconsin and one case in California. As
of December 31, 2009, the Company has been dismissed from the case in California and has
11 claims in Mississippi, two claims remaining in Illinois and one in Wisconsin. The
Company has notified its insurance carriers of these claims and is vigorously defending
these actions. The Company has never manufactured or processed asbestos. The Companys
only exposure to asbestos involves products the Company purchased from third parties.
The Company has not made any provision in its financial statements for the asbestos
litigation. |
(c) | The Company is participating in an investigation initiated by U.S. Customs & Border
Protection (Customs) into duty drawback claims filed on behalf of the Company by its
former export agent. The Company is cooperating with Customs in this investigation and
has voluntarily suspended its duty drawback claims. Based upon its internal
investigation, the Company believes any errors or omissions with respect to its filings
were solely attributable to its former export agent. The Company intends to continue to
cooperate with Customs in resolving this matter. The Company has not made any provision
in its financial statements for the Customs investigation. |
(d) | The Company has unconditional fixed price purchase obligations (take-or-pay
contracts) of approximately $163,040 comprised of commitments to purchase natural gas of
approximately $13,703 and raw material of approximately $149,337. These obligations are
for purchases necessary to fulfill the Companys production backlog. None of these
obligations may be net settled. The Companys future commitments approximate $61,438 in
2010, $68,096 in 2011 and $33,506 in 2012 and beyond. During 2007, 2008 and 2009, the
Company fulfilled its minimum contractual purchase obligations for those periods. |
Various other lawsuits and claims arising in the normal course of business are pending against
the Company and losses that might result from such actions are not expected to be material to
the financial statements. |
F-25
Table of Contents
(12) | Related Party Transactions |
Since 1995, the Company has participated in a joint venture with Weber Metals, Inc. (Weber).
The joint venture is directed toward serving the jet engine market by combining the Companys
technology and market presence with Webers unique equipment. A director of the Company is the
former chief executive officer of Weber. The Companys payments to Weber under the joint
venture were $643, $367 and $371 in 2007, 2008 and 2009, respectively. The joint venture has
no assets or liabilities. |
The Company has entered into a long-term lease for the Irvine, California facilities occupied
by Chen-Tech from the former owners of Chen-Tech for an annual rental of $504. One of the
former owners of Chen-Tech is continuing to serve as President of Chen-Tech. |
(13) | Earnings Per Share |
Basic earnings per share of common stock are computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings per share of
common stock are computed by dividing net income by the weighted average number of common
shares and common share equivalents related to the assumed exercise of stock options and
warrants, using the treasury stock method. |
The following shares were used to calculate basic and diluted earnings per share for the years
ended December 31, 2007, 2008 and 2009: |
December 31, | ||||||||||||
2007 | 2008 | 2009 | ||||||||||
Average Basic Common Shares Outstanding |
14,516,120 | 14,998,437 | 15,901,833 | |||||||||
Incremental Shares Applicable to
Common Stock Options |
34,138 | 2,407 | 413 | |||||||||
Average Diluted Common Shares Outstanding |
14,550,258 | 15,000,844 | 15,902,246 | |||||||||
(14) | Acquisitions |
On July 9, 2008, the Company acquired all of the outstanding equity of Aerex Manufacturing,
Inc. (Aerex) for a combined cash, $11,817, and stock consideration of 45,750 shares which
equated to $941. The net purchase price of $12,758 reflects a post-closing reduction of
$1,200. Located in South Windsor, Connecticut, Aerex provides precision machining of titanium
components for the aerospace industry. |
A summary of the amounts assigned to the assets and liabilities of Aerex is as follows: |
Net Working Capital |
$ | 1,892 | ||
Property, Plant and Equipment |
3,116 | |||
Goodwill |
6,666 | |||
Amortizable Intangibles |
3,651 | |||
Deferred Income Tax Liability |
(2,567 | ) | ||
Other Noncurrent Liabilities |
| |||
$ | 12,758 | |||
The Company acquired all of the outstanding equity of Chen-Tech Industries, Inc. (Chen-Tech)
on September 4, 2008 for a combined cash, $27,254, and stock consideration of 1,256,211 shares
which equated to $31,820. Chen-Tech is a forger of nickel and titanium rotating components for
commercial and military jet engines. The Chen-Tech facility is located in Irvine, California. |
F-26
Table of Contents
A summary of the amounts assigned to the assets and liabilities of Chen-Tech is as follows: |
Net Working Capital |
$ | 7,222 | ||
Property, Plant and Equipment |
21,359 | |||
Goodwill |
21,624 | |||
Amortizable Intangibles |
16,360 | |||
Deferred Income Tax Liability |
(6,068 | ) | ||
Other Noncurrent Liabilities |
(1,423 | ) | ||
$ | 59,074 | |||
Goodwill and amortizable intangibles for both acquisitions are not deductible for income tax
purposes. |
The amortizable intangibles for both acquisitions are composed of customer relationships which
will be amortized over 50 years. |
For both of the acquisitions, the number of shares was determined by the average thirty-day
closing price prior to the acquisition closing dates. |
(15) | Quarterly Results of Operations (Unaudited) |
The following table sets forth unaudited consolidated income statement data for each quarter of
the Companys last two fiscal years. The unaudited quarterly financial information has been
prepared on the same basis as the annual information presented in the financial statements and,
in managements opinion, reflects all adjustments (consisting of normal recurring entries)
necessary for a fair presentation of the information provided. The operating results for any
quarter are not necessarily indicative of results for any future period. |
Quarters Ended | ||||||||||||||||
2008 | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Net Sales |
$ | 117,197 | $ | 118,959 | $ | 120,761 | $ | 112,549 | ||||||||
Gross Profit |
14,821 | 15,507 | 18,193 | 10,782 | ||||||||||||
Operating Income |
10,418 | 10,666 | 12,116 | 6,338 | ||||||||||||
Net Income |
5,983 | 6,219 | 10,435 | 9,568 | ||||||||||||
Basic Earnings Per Share |
0.41 | 0.43 | 0.70 | 0.60 | ||||||||||||
Diluted Earnings Per Share |
0.41 | 0.43 | 0.70 | 0.60 |
Quarters Ended | ||||||||||||||||
2009 | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Net Sales |
$ | 105,739 | $ | 84,686 | $ | 76,191 | $ | 83,216 | ||||||||
Gross Profit |
7,324 | 6,337 | 4,722 | 8,704 | ||||||||||||
Operating Income (Loss) |
3,282 | 2,064 | (970 | ) | 4,872 | |||||||||||
Net Income (Loss) |
1,200 | 650 | (2,209 | ) | 6,453 | |||||||||||
Basic Earnings (Loss) Per Share |
0.08 | 0.04 | (0.14 | ) | 0.41 | |||||||||||
Diluted Earnings (Loss) Per Share |
0.08 | 0.04 | (0.14 | ) | 0.41 |
Per share amounts for the quarters and the full years have each been calculated
separately. Accordingly, quarterly amounts may not add to the annual amounts because of
differences in the average shares outstanding in each period. |
F-27
Table of Contents
(16) | Valuation and Qualifying Accounts |
Balance at | Provision | Balance at | ||||||||||||||
Beginning | Charged to | Accounts | End of | |||||||||||||
of Year | Profit & Loss | Written Off | Year | |||||||||||||
Year ended December 31, 2007 |
||||||||||||||||
Allowance for Doubtful Accounts |
$ | 126 | | $ | (38 | ) | $ | 88 | ||||||||
Year ended December 31, 2008 |
||||||||||||||||
Allowance for Doubtful Accounts |
$ | 88 | $ | 3 | $ | (7 | ) | $ | 84 | |||||||
Year ended December 31, 2009 |
||||||||||||||||
Allowance for Doubtful Accounts |
$ | 84 | $ | 929 | $ | (938 | ) | $ | 75 |
In 2009, the Company recognized a $914 loss associated with an uncollectable account
receivable at its subsidiary, ZKM. |
F-28
Table of Contents
INDEX TO EXHIBITS
Exhibit | Page | |||||
Numbers | Description | Number | ||||
3 | (a) | Articles of Incorporation of the Company as filed with the Secretary of
the State of Wisconsin filed with Form S-1 as Exhibit 3.2 on December
23, 1997 are incorporated by reference. |
||||
3 | (b) | The Ladish Co., Inc. Amended and Restated By-Laws filed with Form 10-Q
as Exhibit 3(b) on November 5, 2003 are incorporated by reference. |
||||
10 | (a) | Form of Ladish Co., Inc. 1996 Long Term Incentive Plan filed with Form
S-1 as Exhibit 10.4 on December 23, 1997 is incorporated by reference. |
||||
10 | (b) | Form of Employment Agreement between Ladish Co., Inc. and certain of
its executive officers filed with Form S-1 as Exhibit 10.5 on December
23, 1997 is incorporated by reference. |
||||
10 | (c) | Amendment No. 1 dated April 13, 2001 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and Firstar Bank Milwaukee, N.A. and
the Financial Institutions Parties thereto, filed with Form 10-K on
February 22, 2002 is incorporated by reference. |
||||
10 | (d) | Amendment No. 2 dated July 17, 2001 to Credit Agreement dated April 14,
2000 among Ladish Co., Inc. and Firstar Bank Milwaukee, N.A. and the
Financial Institutions Parties thereto, filed with Form 10-K on
February 22, 2002 is incorporated by reference. |
||||
10 | (e) | Amendment No. 3 dated April 12, 2002 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and U.S. Bank National Association and
the Financial Institutions Party thereto, filed with Form 10-K on March
25, 2003 is incorporated by reference. |
||||
10 | (f) | Amendment No. 4 dated December 31, 2002 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and U.S. Bank National Association and
the Financial Institutions Party thereto, filed with Form 10-K on March
25, 2003 is incorporated by reference. |
||||
10 | (g) | Amendment No. 5 dated December 30, 2003 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and U.S. Bank National Association and
the Financial Institutions Party thereto, filed with Form 10-K on
February 25, 2004 is incorporated by reference. |
||||
10 | (h) | Amendment No. 6 dated December 29, 2004 to Credit Agreement dated
April 14, 2000 among Ladish Co., Inc. and U.S. Bank National
Association and the Financial Institutions Party Thereto, filed with
Form 10-K on March 14, 2005 is incorporated by reference. |
||||
10 | (i) | Amendment No. 7 dated July 20, 2005 to Credit Agreement dated April 14,
2000 among Ladish Co., Inc. and U.S. Bank National Association and the
Financial Institutions Party Thereto, filed with Form 10-K on March 13,
2006 is incorporated by reference. |
||||
10 | (j) | Amendment No. 8 dated April 28, 2006 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and U.S. Bank National Association and
the Financial Institutions Party Thereto, filed with Form 10-K on March
7, 2007 is incorporated by reference. |
||||
10 | (k) | Amendment No. 9 dated April 25, 2007 to Credit Agreement dated April 14,
2000 among Ladish Co., Inc. and U.S. Bank National Association and the
Financial Institutions Party Thereto, filed with Form 10-K on February
22, 2008 is incorporated by reference. |
Table of Contents
Exhibit | Page | |||||
Numbers | Description | Number | ||||
10 | (l) | Amendment No. 10 dated April 25, 2008 to Credit Agreement dated April
14, 2000 among Ladish Co., Inc. and U.S. Bank National Association and
the Financial Institutions Party Thereto, filed with Form 10-Q on April
29, 2008 is incorporated by reference. |
||||
10 | (m) | Second Amended and Restated Credit Agreement dated April 10, 2009 among
Ladish Co., Inc. and U.S. Bank National Association and the Financial
Institutions Party Thereto, filed with Form 8-K on April 10, 2009 is
incorporated by reference. |
||||
10 | (n) | Amendment No. 1 dated July 31, 2009 to Second Amended and Restated
Credit Agreement dated April 10, 2009 among Ladish Co., Inc. and U.S.
Bank National Association and the Financial Institutions Party Thereto,
filed with Form 10-Q on July 31, 2009 is incorporated by reference. |
||||
10 | (o) | Note Purchase Agreement dated May 16, 2006 between Ladish Co., Inc. and
the Purchasers listed therein, filed with Form 8-K on May 17, 2006 is
incorporated by reference. |
||||
10 | (p) | Note Purchase Agreement dated September 2, 2008 between Ladish Co.,
Inc. and the Purchasers listed therein, filed with Form 8-K on
September 2, 2008 is incorporated by reference. |
||||
10 | (q) | Third Amendment dated December 21, 2009 to Note Purchase Agreements
dated as of July 20, 2001 between Ladish Co., Inc. and the Purchasers
listed therein.
|
||||
10 | (r) | Agreement dated September 15, 1995 between Ladish Co., Inc. and Weber
Metals, Inc. filed with Form S-1 as Exhibit 10.7 on February 23, 1998
is incorporated by reference. |
||||
10 | (s) | Agreement dated February 24,2005 between Ladish Co., Inc. and Huta
Stalowa Wola S.A. filed with Form 8-K on March 2, 2005 is incorporated
by reference. |
||||
10 | (t) | Ladish Co., Inc. Long-Term Incentive Plan dated January 1, 2006, filed
with Form 10-K on March 7, 2007 is incorporated by reference. |
||||
14 | Ladish Co., Inc. Policies filed with Form 10-K on March 25, 2003 is
incorporated by reference. |
|||||
21 | List of Subsidiaries of the Company.
|
|||||
23 | Consent of Independent Registered Public Accounting Firm.
|
|||||
31 | (a) | Written statement of the chief executive officer of the Company
certifying this Form 10-K complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934.
|
||||
31 | (b) | Written statement of the chief financial officer of the Company
certifying this Form 10-K complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934.
|
||||
32 | Written Statement of the chief executive officer and chief financial
officer of the Company certifying this Form 10-K complies with the
requirements of 18 U.S.C. §1350
|