ITEM 1. BUSINESS
INTRODUCTION
NRP Inc., operating under its trade name, ATC Communications Group (hereinafter "ATC" or the "Company"), is a provider of outsourced telecommunications-based marketing and information services to major corporations in the United States.
The Company has shifted its strategic focus to building upon and enhancing this core business, and away from its previous plan to assemble an integrated direct marketing company comprised of direct mail marketing and mailing list services in addition to telecommunications-based marketing services. In the year ended June 30, 1993 ("fiscal 1993"), management examined the Company's overall business plan and each operating segment's operating performance and concluded that (i) the integrated company strategy had not achieved the expected synergies and economies of scale to management's satisfaction, and (ii) the telecommunications-based marketing business possessed significantly greater growth potential than the other two segments. Accordingly, in the year ended June 30, 1994 ("fiscal 1994"), the Company divested of its direct mail publishing subsidiary, and in the year ended June 30, 1995 ("fiscal 1995"), divested of its mailing list services business, thereby enabling the Company to concentrate on growing and creating long-term value in its telecommunications-based subsidiary. Management believes this shift in strategy has enabled the Company to grow revenues and improve operating results, while positioning the Company to compete effectively as a provider of telecommunications-based marketing and information services.
The Company's headquarters are located at 5950 Berkshire Lane, Suite 1650, Dallas, Texas 75225, and its telephone number is (214) 361-9870. The Company was incorporated in Delaware on August 2, 1985 under the name of Kenneth Resources, Inc. and changed its name to NRP Inc. on July 12, 1988. The Company recently began using the tradename ATC Communications Group to reflect its new operating focus and plans to seek shareholder approval at the next annual meeting to change its legal name to ATC Communications Group, Inc.
TELECOMMUNICATIONS-BASED SERVICES
Description of Services
The Company, through its subsidiary, Advanced Telemarketing Corporation ("Advanced"), designs, manages, and conducts large-scale, complex telecommunications-based marketing and customer services programs on an outsourced basis to a broad range of companies and organizations in a variety of industries. Advanced performs its services through two distinct divisions.
Through its ATC Marketing division, Advanced offers clients customized, large-volume inbound and outbound call processing services featuring "live" operators to interact with clients' customers and prospects. Additionally, through its ATC Call Management division, Advanced manages call center facilities for clients under multi-year contracts which usually require the development of proprietary software systems. Both divisions also provide clients with high speed analysis and delivery of marketing and other analytical information valuable to the client which Advanced captures while performing its services.
Overall, during fiscal 1995, approximately 46.4% of Advanced's revenues were generated by inbound call volume and 53.6% by outbound call volume. Advanced does not engage in any form of outbound calling which uses computerized voice presentations or requires unsolicited financial requests (i.e. fundraising) and is not involved in the "900" number business.
Description of Operations
The Company operates and manages six fully-automated call centers with a capacity of more than 2,900 workstations located in the Dallas area, in Chicago and in San Francisco. These call centers operate six Rockwell automatic call distributors. The data system itself is based on an open architecture which permits real-time interface of the Company's data processing systems with the client's host systems to provide a seamless, rapid flow of data to the client. Outbound calling is enhanced by a Rockwell predictive dialing system which escalates dialing activity in advance of workstation availability and automatically eliminates calls not answered by a human respondent. This predictive dialing system enhances efficiency and productivity by minimizing operator non-productive time. Advanced also maintains a substantial information systems staff which permits flexibility by creating customized software applications for its clients as well as the capability to react quickly to its clients' changing needs.
Because Advanced's marketing and service representatives deal directly with its clients' customers and sales prospects, the Company places a heavy emphasis on its training and quality control process. System-wide, Advanced has in excess of 30,000 square feet dedicated to these functions. At the subsidiary's headquarters, Advanced has built a 14,000 square foot education center adjacent to a 14,700 square foot call center which is equipped for live role playing when not in use as a client call center. Advanced employs 15 full and part-time trainers dedicated to conducting both primary and recurrent training for all representatives. Depending on the complexity of the clients' applications, training can require up to six weeks to complete. Quality control is measured by various organizations within the Company on both a quantitative and qualitative basis through multiple processes. This attentiveness to training and customer service enables Advanced's representatives to perform a variety of highly complex and proprietary functions for its clients in both inbound and outbound calling programs.
Marketing and Clients
The business of providing call handling services is highly competitive, although very fragmented, consisting of a few large outsourcing companies, a significant number of small independent providers and numerous "in-house" operations. In 1992 alone, it is estimated that over $300 billion in goods and services were sold via telecommunications. This figure does not include the substantial costs incurred by businesses in processing incoming customer service calls. Increasingly, companies are outsourcing these call handling services in an effort to focus their resources on their core competencies, improve operating quality and efficiencies, and reduce costs.
Advanced targets its marketing efforts towards large corporations in selected industries that utilize telecommunications as an integral, ongoing element in their core marketing and/or customer service strategy. These corporations' call handling requirements demand the sophistication, volume and quality requirements to capitalize effectively on Advanced's technology and client support infrastructure in addition to having the greatest potential for growth. Advanced seeks to produce recurring revenue and develop long-term alliances with its clients by concentrating on service, quality and flexibility and by integrating its technological capabilities with its clients' internal systems.
Advanced believes its competitive advantages include its capacity, its emphasis on quality and service to the client, its technological capabilities, and its flexibility, allowing Advanced to respond to the clients' changing requirements. These advantages have enabled ATC to grow rapidly in the last two fiscal years by attracting a variety of new clients in various industries and by expanding the services provided to its existing clients. The following entities accounted for ten percent or more of the gross revenues of the Company in 1994: AT&T, Chemical Bank, GTE Service Corporation and AT&T Universal Card, while AT&T and AT&T Universal Card accounted for ten percent or more of the gross revenues of the Company in fiscal 1995.
Governmental Regulations
During the past five years the industry in which the Company operates has been impacted by state and federal government regulations directed specifically at the industry. In addition, certain state and federal governmental bodies have proposed legislation to further regulate the industry. While the Company cannot predict what any governmental body may do, management does not believe the currently existing or proposed legislation will alter the Company's operating procedures or increase its compliance cost because the Company adheres to self-imposed standards that management believes are more restrictive than such currently existing and proposed regulations.
Revenues and Seasonal Nature of Business
The Company's revenues are affected by the timing and magnitude of its clients' marketing programs and the commencement of new programs; thus the Company experiences and expects to continue to experience quarterly variations in revenues. Although the business is not seasonal in nature, historically Advanced has generated a slightly larger percentage of its annual revenues in the second and fourth quarters of its fiscal year. Revenues generated by Advanced accounted for approximately 100%, 68% and 48% of the Company's consolidated revenues of both continuing and discontinued operations for the years ended June 30, 1995, 1994, and 1993, respectively.
EMPLOYEES
As of August 31, 1995, the Company employed approximately 2,617 persons in the following areas: 130 in management and general administration, 3 in marketing and sales, 168 in direct supervision of marketing agents and 2,316 marketing agents. The Company has not experienced any material difficulty in attracting and retaining qualified personnel in the geographic regions where it currently conducts business.
INDUSTRY SEGMENT INFORMATION
As a result of the divestitures of the direct mail marketing and mail list businesses, the Company discontinued the operations of the two business segments. The financial results of the operations of the Company's remaining business segment, outsourced telecommunications-based services, are included in Item 8. - "Financial Statements and Supplementary Data". Summary financial information related to the discontinued business segments is included in Note 14. Disposition of Assets of Item 8. - "Financial Statements and Supplementary Data".
ITEM 2.

ITEM 2. PROPERTIES.
The Company's operating subsidiary, Advanced, currently performs its services in six call centers with a total capacity of 2,946 workstations (compared to approximately 1,400 workstations reported in the prior year): (i) 686 positions located in Las Colinas, Texas in a 52,866 square foot facility, (ii) 240 positions located in Garland, Texas occupying 12,963 square feet, (iii) an Irving, Texas facility comprised of a 14,069 square foot education center and a 20,209 square foot call center housing 460 positions, (iv) a 90,000 square foot call center in Dallas, Texas with a capacity of 1,270 positions, (v) a 60 position call center in Chicago, Illinois dedicated to a single client and (vi) a 32,616 square foot call center with 230 positions in San Francisco, California which also serves a single client. All of Advanced's facilities are occupied pursuant to various lease arrangements, except the Chicago facility, which is owned by Advanced's client and is occupied by Advanced at the client's expense. While Advanced's current capacity is sufficient to handle its current production demands, as Advanced's growth continues additional call center facilities may be needed.
The Company's principal executive offices in Dallas, Texas are occupied pursuant to a lease expiring November 30, 1996 and contain approximately 4,170 square feet. The lease calls for a monthly rental of approximately $5,386 per month.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS.
Other than ordinary routine litigation incidental to its and its subsidiaries' businesses, neither the Company nor its subsidiaries are parties to, nor are their properties the subject of, any material pending legal proceedings.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock, $.01 par value, trades on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "ATCT". As of August 31, 1995 there were approximately 13,563,361 shares of Common Stock outstanding held by approximately 655 holders of record.
The table below lists the range of high and low bids for the Company's Common Stock as reported by NASDAQ for the two-year period ended June 30, 1995 and the subsequent interim period.
The above quotations represent prices between dealers and do not include retail mark-up, mark-down or commissions and may not represent actual transactions.
DIVIDENDS
Since its inception the Company has not declared a cash dividend on its Common Stock and does not anticipate doing so in the foreseeable future. The Company pays an annual dividend of $.36 per share on its 29,778 outstanding shares of Series B Preferred Stock and the Company pays an annual dividend of $.11 per share on its 840,000 outstanding shares of Series C Preferred Stock. Pursuant to Advanced's working capital line of credit and equipment term loan credit agreements, Advanced is restricted in its ability to pay dividends to ATC.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA.
The table on the following page sets forth certain selected consolidated financial data for the Company and its subsidiaries for the last five years. This information should be read in conjunction with Item 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
As discussed previously, in fiscal 1993 management determined that its Advanced subsidiary possessed a greater potential for growth than the Company's other lines of business. Accordingly, the Company consummated several transactions which resulted in the strengthening of the Company's balance sheet, increasing the Company's liquidity and focusing the Company's efforts on Advanced. These transactions included: (i) the sale of the assets and the discontinuation of the M/B Ltd. business segment, (ii) the issuance of 840,000 shares of Series C Convertible Preferred Stock upon the conversion of approximately $3.1 million in 15% short-term debt, and (iii) the sale of the assets and discontinuation of the NRL business segment.
With these transactions completed, management then focused on securing adequate working capital and equipment financing to fund Advanced's near-term growth. Advanced is a labor intensive business, incurring multiple payrolls before clients are invoiced and remittances are received. During times of growth it is virtually impossible for Advanced to fund its working capital needs solely via operating cash flow due to its labor intensive nature and the timing of its receipts. Therefore, to meet its growth related working capital needs, in May 1994, Advanced secured a three year $15 million working capital facility with a major commercial bank to replace its previous receivable financing arrangement. Availability under this new facility is based on Advanced's accounts receivable balance. In addition to increasing Advanced's availability from $5 million to $15 million, the new working capital facility also decreased the rate Advanced pays for working capital borrowings.
In addition to the new working capital facility, Advanced also secured a $1.5 million equipment term loan from the same commercial bank which was utilized to partially fund the acquisition of additional telecommunications and computer equipment and furniture necessary to support the doubling of Advanced's production capacity in the 1995 fiscal year. Additionally, Advanced secured operating leases to acquire approximately $4.0 million in equipment, secured capital lease arrangements of approximately $1.6 million, and utilized operating cash flow to fund this increase in production capacity.
Management believes the transactions described above have provided the liquidity and access to sufficient working capital financing to fund Advanced near-term growth and have reduced borrowing costs, strengthened the balance sheet, and have allowed Advanced to increase its production capacity. While Advanced's current capacity is sufficient to handle its current production demands, as Advanced's growth continues, management believes that additional call centers will be needed to facilitate the increased business and that furniture and equipment, as well as certain technological upgrades to Advanced's existing equipment, will be needed for such call centers. Advanced may have to secure additional financing for these capital needs as its current commitments may be inadequate. Although no assurances can be made in this regard, management anticipates that, based on ATC's ability to secure such financing to date, the Company will be able to secure funding for such future capital equipment needs.
The $15 million receivable credit facility and the $1.5 million term loan secured by Advanced from a major commercial bank, mentioned above, contain various covenants which limit, among other things, Advanced's indebtedness, capital expenditures, investments, payments and dividends to the Company and requires Advanced to meet certain financial tests. Similarly, under the terms of the guaranty
arrangement, the Company is subject to certain covenants limiting, among other things, its ability to incur indebtedness, enter into guaranties, and acquire other companies. These credit facilities are secured by liens on Advanced's accounts receivables, furniture, and equipment and are guaranteed by ATC. See Notes 3 and 4 to Item 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages through of this Form 10-K Annual Report.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On June 2, 1995 the Audit Committee of the Board of Directors of the Company unanimously approved the dismissal of Grant Thornton as the independent certified public accountants and auditors for the Company. Grant Thornton performed the audit for the Company for the fiscal years ended June 30, 1992, 1993 and 1994. Grant Thornton's reports on the financial statements of the Company for those years did not contain an adverse opinion, nor a disclaimer of opinion, nor were qualified or modified as to uncertainty, audit scope or accounting principles. Except as described below, there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused it to make reference to the subject matter of the disagreements in connection with its report during the Company's two most recent fiscal years and any subsequent interim period preceding this dismissal.
With regard to the financial statements of the Company for the year ended June 30, 1993, there was an initial disagreement as to the amount of the deferred taxes to be recognized for net operating losses carried forward. With regard to the financial statements of the Company for the year ended June 30, 1994, there was an initial disagreement as to the accounting treatment for the recognition of a deferred tax asset for net operating loss carryforwards acquired in a business combination for which goodwill was recorded. Both disagreements, however, were resolved to the mutual satisfaction of Grant Thornton and the Company.
Neither the Company's Audit Committee nor its Board of Directors discussed the subject matter of the above described disagreements with Grant Thornton. The Company has authorized Grant Thornton to respond fully to the inquiries of the successor accountant concerning the subject matter of such disagreements. The Audit Committee's decision to dismiss Grant Thornton was unrelated to the initial disagreements described above.
Also on June 2, 1995, the Audit Committee of the Board of Directors unanimously approved the appointment of the firm of Price Waterhouse LLP to serve as the independent accountants for the Company for the fiscal year ending June 30, 1995.
On June 9, 1995 the Company filed a report on Form 8-K related to the dismissal of Grant Thornton as independent accountants for the Company.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
This information will be contained in the definitive proxy statement of the Company for the 1995 Annual Meeting of Stockholders under the captions "Election of Directors" and "Executive Officers" and is incorporated herein by reference.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION.
This information will be contained in the definitive proxy statement of the Company for the 1995 Annual Meeting of Stockholders under the caption "Compensation of Directors and Executive Officers" and is incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This information will be contained in the definitive proxy statement of the Company for the 1995 Annual Meeting of Stockholders under the caption "Beneficial Ownership of Common Stock" and is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information will be contained in the definitive proxy statement of the Company for the 1995 Annual Meeting of Stockholders under the captions "Certain Relationships and Related Transactions" and is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS
See "Index to Consolidated Financial Statements" included on page of this Form 10-K Annual Report for a listing of the financial statements and schedules filed as a part of this Form 10-K Annual Report.
EXHIBITS
The following exhibits are filed as a part of this Form 10-K Annual Report:
3.1 Certificate of Incorporation of Kenneth Resources, Inc. (Incorporated by reference from Company's Amendment No. 1 to Form S-1 Registration Statement - File No. 33-6268).
3.2 Certificate of Amendment of Kenneth Resources, Inc. to reflect change of name to National Reference Publishing, Inc. (Incorporated by reference from Company's Amendment No. 1 to Form S-1 Registration Statement - File No. 33-6268).
3.3 Certificate of Amendment of National Reference Publishing, Inc. to reflect change of name to NRP Inc. (Incorporated by reference from Company's Form 10-K Annual Report for the year ended June 30, 1994).
3.4 Bylaws of Kenneth Resources, Inc. (Incorporated by reference from Company's Amendment No. 1 to Form S-1 Registration Statement - File No. 33-6268).
3.5 Amendment to Bylaws of Kenneth Resources, Inc. (Incorporated by reference from Company's Amendment No. 1 to Form S-1 Registration Statement - File No. 33-6268).
4.1 Specimen of Share Certificate of Company's Common Stock. (Incorporated by reference from Company's Form 10-K Annual Report for the year ended June 30, 1994).
4.2 Form of Series B Preferred Stock, as amended. (Incorporated by reference from Company's Form 10-K Annual Report for the year ended June 30, 1994).
4.3 NRP Inc. Series C Preferred Stock certificate issued to Codinvest Limited with attached designations. (Incorporated by reference from Company's Form 8-K Current Report dated June 16, 1994).
10.8 Lease Agreement dated January 1, 1991 by and between Royal Tech Properties, Ltd. and Advanced Telemarketing Corporation. (Incorporated by reference from Company's Form 10-K Annual Report for the year ended June 30, 1991).
10.9 Settlement Agreement and Promissory Note dated September 18, 1992 by and between Advanced Telemarketing Corporation and Merrill Lynch Private Capital Inc. (Incorporated by reference from Company's Form 10-K Annual Report for the year ended June 30, 1992).
10.10 Asset Purchase Agreement by and between Advanced Telemarketing Corporation and GTE Market Resources, Inc. dated December 31, 1992. (Incorporated by reference from Company's Form 10-Q Quarterly Report for the quarter ended December 31, 1992).
10.11 Asset Purchase Agreement by and among M/B Ltd. Services, Inc., NRP Inc., and United Communications Group executed July 26, 1993. (Incorporated by reference from Company's Form 8-K Current Report dated August 13, 1993).
10.12 Non-Competition Agreement by and among M/B Ltd. Services, Inc., NRP Inc., and United Communications Group executed July 26, 1993. (Incorporated by reference from Company's Form 8-K Current Report dated August 13, 1993).
10.13 Loan and Security Agreement dated May 17, 1994 among Continental Bank N.A., Advanced Telemarketing Corporation and American Telesales Corporation. (Incorporated by reference from Company's Form 8-K Current Report dated June 16, 1994).
10.14 Guaranty dated May 17, 1994 by NRP Inc. in favor of Continental Bank, N.A. (Incorporated by reference from Company's Form 8-K Current Report dated June 16, 1994).
10.15 Investment Letter dated June 16, 1994 by Codinvest Limited. (Incorporated by reference from Company's Form 8-K Current Report dated June 16, 1994).
10.16 Asset Purchase Agreement by and among NRL Brokerage, Inc., NRL Management, Inc., S.D. Bogner, Inc., NRP Inc., and Stephen D. Bogner executed August 30, 1994 (including promissory notes and guaranties). (Incorporated by reference from Company's Form 8-K Current Report dated August 30, 1994).
21 Subsidiaries of Company:
The Company as of June 30, 1995 had the following operating subsidiary:
27 Financial Data Schedule.
During fiscal 1994 the Company conducted its telecommunications-based operations through two subsidiaries, Advanced and American Telesales Corporation ("American"). Effective January 1, 1995, the Company merged the wholly owned American subsidiary into Advanced. As a result of the merger, all of the Company's telecommunications-based operations are currently conducted by Advanced.
Copies of the above Exhibits are available to stockholders of record at a charge of $.50 per page, minimum of $5.00 each. Direct requests to:
NRP Inc. Attention: Secretary 5950 Berkshire Lane, Suite 1650 Dallas, Texas 75225
REPORTS ON FORM 8-K
On June 9, 1995 the Company filed a report on Form 8-K reporting, under "Item 4. - Changes in Registrant's Certifying Accountant", the dismissal of Grant Thornton as independent certified public accountants and auditors for the Company. See "Item 9. - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NRP INC. (The Registrant)
Dated: September 27, 1995 By: /s/ Michael G. Santry -------------------------------------- Michael G. Santry Chief Executive Officer and Chief Financial Officer
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 Company and in the capacities and on the dates indicated.
Dated: September 27, 1995 By: /s/ Michael G. Santry ---------------------------------------- Michael G. Santry, Director
Dated: September 27, 1995 By: /s/ Patrick V. Stark ---------------------------------------- Patrick V. Stark, Director
Dated: September 27, 1995 By: /s/ Thomas Bijou ---------------------------------------- Thomas Bijou, Director
Dated: September 27, 1995 By: /s/ Jerry L. Sims, Jr. ---------------------------------------- Jerry L. Sims, Jr., Controller and Director
Dated: September 27, 1995 By: ---------------------------------------- J. Michael Allred, Director
Dated: September 27, 1995 By: ---------------------------------------- J. Frank Mermoud, Director
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES (ITEM 14(A))
All other schedules are omitted since the required information is not applicable or is not material or because the information required is included in the consolidated financial statements and notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of NRP Inc.
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of NRP Inc. and its subsidiary at June 30, 1995, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Dallas, Texas August 29, 1995
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders NRP Inc.
We have audited the accompanying consolidated balance sheet of NRP Inc. and Subsidiaries as of June 30, 1994 and the related consolidated statements of income, shareholders' equity and cash flows for each of the two years in the period then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NRP Inc. and Subsidiaries as of June 30, 1994 and the consolidated results of their operations and cash flows for each of the two years in the period then ended, in conformity with generally accepted accounting principles.
We have also audited Schedule II of NRP Inc. and Subsidiaries for each of the two years in the period ended June 30, 1994. In our opinion, this schedule presents fairly, in all material respects, the information required to set forth therein.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993.
GRANT THORNTON
Dallas, Texas September 7, 1994
NRP INC. CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED JUNE 30, 1995, 1994, AND 1993
See accompanying notes
NRP INC. CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND 1994
See accompanying notes.
NRP INC.
CONSOLIDATED STATEMENTS OF SHAREH0LDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
See accompanying notes.
NRP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1995, 1994, AND 1993
See accompanying notes.
NRP INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995, 1994 AND 1993
1. ORGANIZATION AND ACQUISITIONS
NRP Inc., operating under the trade name ATC Communications Group ("ATC" or the "Company"), was incorporated in 1985. Through its subsidiary, ATC engages in the telecommunications-based marketing and information services business. Prior to the disposition of the assets of its other business segments, ATC engaged in the businesses of direct mail marketing (primarily Zip Code directory packages) and mail list management and brokerage services. (See Note 14. Disposition of Assets).
At June 30, 1995, ATC has the following operating subsidiary:
During fiscal 1994 the Company conducted its telecommunications-based operations through two subsidiaries, Advanced and American Telesales Corporation ("American"). Effective January 1, 1995, the Company merged the wholly owned American subsidiary into Advanced. As a result of the merger, all of the Company's telecommunications-based operations are currently conducted by Advanced.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation - The consolidated financial statements include the accounts of ATC and its majority- owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
Revenues - Revenues are recognized as services are performed.
Property and equipment - Property and equipment are carried at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets. Equipment, furniture and fixtures, and computer software are depreciated over five-year to eight-year lives.
Capitalization of start-up costs - Advanced capitalizes certain up-front costs associated with the start-up of new business which is to be performed for its clients pursuant to long-term contracts (typically 3-5 years). Such costs are amortized over the life of such long-term contracts.
Cost in excess of net assets acquired - The cost in excess of net assets acquired recognized in the acquisition of Advanced is being amortized using the straight-line method over 25 years.
Income taxes - ATC joins with its subsidiaries in filing consolidated federal income tax return. In 1993 ATC adopted the Financial Accounting Standards Board's SFAS No. 109 "Accounting for Income Taxes", which requires an asset and liability approach for financial accounting and reporting for income taxes. The cumulative effect of this change was not material to financial statements for years prior to 1993; therefore, it was not necessary to restate prior year balances.
Statements of cash flows - For the purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents.
Reclassifications - Certain 1994 and 1993 balances have been reclassified to conform with the 1995 presentation.
Concentration of credit risk - The Company sells to customers in diversified industries throughout the United States. The Company performs periodic credit evaluations of its customers' financial conditions and generally does not require collateral. Receivables are generally due within 30 days. Credit losses from customers have been within management's expectations. Advanced currently has five major customers (see Note 11).
3. NOTES PAYABLE
Notes payable at June 30, 1995 and 1994, are summarized below:
4. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1994, is summarized below:
Both the note payable to the commercial bank and the revolving line of credit discussed in Note 3 above contain various covenants which limit Advanced's indebtedness, capital expenditures, investments and payment and dividends to ATC. Additionally, Advanced is required to meet certain financial tests. The note payable and the revolving line of credit are guaranteed by ATC. The guaranty agreement limits ATC's ability to incur indebtedness, enter into guaranties and to acquire other companies.
The unsecured note payable by Advanced to Merrill Lynch Private Capital Inc. ("MLPC") also contains a provision requiring semi-annual prepayments of principal if Advanced achieves certain net income levels. As of June 30, 1995 the entire principal balance under the note was due and payable to MLPC as a result of the cumulative effect of the achievement of such net income levels by Advanced. Currently, Advanced is in discussions with MLPC regarding a restructuring of the payment terms of the note. At June 30, 1995 the entire balance of the note was classified as current on ATC's balance sheet.
Future maturities of long-term debt at June 30, 1995, are as follows:
The Company paid interest in the amount of $920,059, $518,291, and $442,677 in 1995, 1994 and 1993, respectively.
5. LEASES
A portion of Advanced's computer equipment was purchased in 1994 and 1995 under capital leases totaling $4,070,490. These capital leases are included in the accompanying consolidated balance sheet under the following captions at June 30, 1995:
Future minimum lease payments for all noncancelable leases with initial or remaining terms of one year or more at June 30, 1995, are as follows:
In 1994 the Company renegotiated one of its operating leases and recognized as a reduction of rent expense approximately $100,000 of straight-line rents which had been previously deferred. Rent expense on operating leases for the years ended June 30, 1995, 1994, and 1993 was $2,791,550, $976,745, and $960,467, respectively.
6. PREFERRED STOCK
On January 21, 1994, 127,044 shares of Series B preferred stock were converted into 254,088 shares of common stock.
On June 16, 1994 approximately $3.1 million in short-term debt was converted into 840,000 shares of a newly created Series C Preferred Stock. The Series C Preferred Stock entitles the registered owners to the following rights and preferences: (i) beginning June 30, 1995, preferential cumulative cash dividends at the annual rate of $0.11 per share, (ii) at any time prior to June 30, 2014, the right to convert each share into shares of NRP Inc. Common Stock, $.01 par value, at a conversion ratio of one share of Series C Preferred Stock for five shares of Common Stock, (iii) a liquidation preference of $3.66 per share, (iv) cash dividends on parity with shareholders of Common Stock based on the number of shares of Common Stock into which each share of Series C Preferred Stock is convertible and, (v) the right to a number of votes for each share of Series C Preferred Stock that is equal to the number of shares of Common Stock into which shares of Series C Preferred Stock is convertible.
7. EARNINGS PER SHARE
Primary and fully diluted earnings per common share is computed by dividing adjusted net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Common stock equivalents consist of common stock issuable under the assumed exercise of stock options and warrants and the assumed conversion of the Company's issued and outstanding preferred stock. A computation of earnings per share follows:
(1) Based on the treasury stock method using the average market price. (2) Based on the treasury stock method using the greater of the average or ending market price.
(3) As discussed in Note 12, the Company's Advanced subsidiary has granted options to purchase Advanced's common stock to certain of its key employees and officers. The Company's net income from continuing operations is therefore adjusted for the dilutive effect of such options on Advanced's income applicable to the Company.
8. OTHER RELATED PARTY TRANSACTIONS
The Company holds a note receivable from Freiburghaus & Partners, S.A. ("F&P"), a shareholder of record. The note bears interest at 11% per annum. At June 30, 1995 and 1994, unpaid principal and accrued interest amounted to $73,696 and $86,284, respectively. Interest income from this note amounted to $8,853, $9,462, and $14,300, in 1995, 1994 and 1993, respectively. In 1995, 1994, and 1993, the Company applied $21,440, $56,456, and $56,456, respectively, of accrued preferred stock dividends due to F&P against the note.
At June 30, 1995 and 1994, an officer of the Company had outstanding borrowings and accrued interest of approximately $793,773 and $150,727, respectively, pursuant to a line of credit. The borrowing bears 6% annual interest and is due in full on June 30, 1996. Interest income from the receivable amounted to approximately $19,000, $21,000 and $22,000 in 1995, 1994 and 1993, respectively. As of September 27, 1995 payments had been received from the officer which reduced the balance of such borrowings to approximately $294,000.
As part of the purchase of M/B Ltd. (see Note 14), the Company entered into a five-year management agreement with FEM, Inc. ("FEM"), a company controlled by a shareholder of the Company, effective March 1, 1986. In return for consulting and administrative services, the Company paid FEM $165,000 per year in monthly installments of $13,750 through March 1994. ATC paid FEM consulting fees of $110,000 and $165,000 for each of the years ended June 30, 1994 and 1993, respectively. At June 30, 1995 FEM had outstanding borrowings and accrued interest of $123,650 pursuant to a note receivable to the Company. The note bears 3% annual interest and is due in full on June 30, 1996.
In August 1994 the Company sold certain of the assets of its list services subsidiaries to an officer of such subsidiaries. See further discussion in Note 14.
9. INCOME TAXES
As discussed in Note 2, during 1993 the Company adopted Statement of Financial Accounting Standards No. 109 (the "Statement"). The Statement changes the method of accounting for deferred income taxes by requiring an asset and liability approach for financial accounting and reporting purposes. As a result of the change in accounting, the Company recognized a deferred tax benefit for the year ended June 30, 1993. During 1994 the Company corrected its 1993 consolidated net operating loss carryforwards by approximately $1,252,000 and corrected its 1993 classification of certain of the net operating loss carryforwards by reducing costs in excess of net assets acquired by approximately $285,000. Accordingly, the deferred income tax benefit and net income was reduced approximately $700,000. There was no cumulative effect on previous years as a result of the accounting change.
During the years ended June 30, 1995 and 1994, the Company reduced cost in excess of net assets acquired by approximately $570,000 and $340,000, respectively by recording such net operating loss carryforwards on the Company's balance sheet.
The components of the income tax expense (benefit) applicable to continuing operations for the fiscal year ended June 30 are as follows:
A reconciliation of the statutory federal income tax rate and the effective rate as a percentage of pre-tax income for the fiscal year ending June 30 is as follows:
The components of deferred taxes included in the accompanying consolidated balance sheet as of June 30 are as follows:
At June 30, 1995 the Company had net operating loss carryforwards of approximately $2,200,000 which are available to be carried forward to future periods. Due to the ownership changes which have taken place in prior years, the net operating loss carry forwards are subject to limitations set forth in regulations under the Internal Revenue Code. Under those regulations, future utilization is limited to approximately $279,000 per year. In fiscal 1995, the Company concluded, based on an assessment of all available evidence, that it is more likely than not that future taxable income will be sufficient to realize the tax benefits available; therefore, the Company reduced the valuation allowance $570,279. Changes in the valuation allowance related to the utilization of these net operating loss carryforwards reduced the costs in excess of net assets acquired.
10. COMMITMENTS
Advanced entered into an employment agreement with an officer of the company through December 1995. The agreement specifies an annual base salary of $250,000 plus bonuses based on the Company's performance.
11. MAJOR CUSTOMERS
The Company had sales to major customers comprising the following percentages of consolidated revenues for the years ended June 30:
12. STOCK OPTIONS AND WARRANTS
In February 1993 the Company's shareholders approved the NRP Inc. 1992 Stock Option Plan (the "Plan") which provides for the granting of options to purchase up to a maximum of 3,000,000 shares of Common Stock to key employees, officers, and directors of the Company and its subsidiaries. The Company granted, pursuant to the Plan, options to purchase 1,140,000 and 475,000 shares of Common Stock in fiscal 1994 and fiscal 1995, respectively, at the market price on the date of grant. Such options granted are exercisable for 10 years from the date of grant. At June 30, 1995, 1,203,000 of these options were fully vested with 164,334, 137,333 and 110,333 options vesting in fiscal years 1996, 1997 and 1998, respectively. The Company may grant additional options at any time prior to December 11, 2002.
In May 1994 the Company granted warrants, which expire May 30, 1999, to a financial advisory services firm entitling the firm to purchase 650,000 shares of Common Stock at a purchase price of $1.625 per share, the market price on the date granted.
In April 1993, Advanced initiated the Advanced Telemarketing Corporation 1993 Stock Option Plan which provides for the granting of options to Advanced's key employees, officers, and directors to purchase up to a maximum of 436,471 shares of Advanced's common stock. To date options to purchase 414,652 shares of Advanced's common stock have been granted. 185,946 options have vested with 137,662, 73,912 and 17,132 options vesting in the fiscal years ending June 30 1996, 1997 and 1998, respectively. Advanced granted such options at management's best estimate of the common stock's market value at the date of grant.
Pursuant to the Advanced Telemarketing Corporation 1993 Stock Option Plan, in October, 1993, Advanced granted to the president of Advanced options to purchase 680,908 shares of Advanced's common stock (representing 15% of the fully diluted common stock of Advanced) at $0.01 per share. In March 1995, the president of Advanced surrendered such options in exchange for stock options to purchase a total of 2,410,880 shares of ATC Common Stock at $0.8125 per share, the market price at the date of grant. The ATC options granted became fully exercisable on August 1, 1995 and are exercisable for 10 years from the date of grant.
13. EMPLOYEE BENEFIT PLAN
During fiscal 1991 Advanced adopted a defined contribution 401(k) plan covering all eligible employees, as defined. Eligible employees may elect to contribute up to 15% of their compensation, not to exceed $9,000 per year. Advanced may, at its discretion, match employee contributions. There was no employer matching contribution made in 1995, 1994 or 1993.
14. DISPOSITION OF ASSETS
On August 30, 1994, pursuant to an asset purchase agreement, NRL Direct, Inc., a wholly-owned subsidiary of NRP, sold certain of its assets consisting primarily of cash, accounts receivable, fixed assets, tradenames, and other assets for promissory notes aggregating approximately $745,000. As a result of the asset disposition, effective July 1, 1994 ATC no longer engages in the list brokerage and list management businesses. The net assets conveyed were reclassified on the June 30, 1994 balance sheet to separately identify them as assets held for sale.
On August 13, 1993 M/B Ltd. Services, Inc., a wholly-owned subsidiary of NRP ("M/B Ltd."), pursuant to an asset purchase agreement, sold substantially all of the assets related to the marketing, publishing and distribution of the National Five Digit ZIP Code Directory package (the "Directory"). M/B Ltd. received net cash consideration of approximately $4.7 million and recognized a one-time after-tax gain of approximately $2.5 million in the fiscal year ending June 30, 1994. As a result of the asset disposition, M/B Ltd. no longer sells the Directory.
Summary financial information related to the discontinued business segments was as follows:
The net after-tax income or loss derived from the operation of these business segments has been classified on the statement of income to separately identify them as income from operations of discontinued business segments, net of applicable taxes.
15. INDUSTRY SEGMENT INFORMATION
ATC, through its subsidiary, operates principally in one industry segment: telecommunications based marketing and information services.
NRP INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
EXHIBIT INDEX


Item 1. Business
General Developments General Signal Corporation, incorporated in New York in 1904, is a manufacturer of equipment for the Process Controls, Electrical Controls and Industrial Technology industries. The company's key Process industry products include pumps, mixers, and valves for municipal water supply and wastewater treatment, pulp, paper, food, pharmaceutical and chemical manufacturing and ultra low-temperature freezers for life science research. In the Electrical industry, key products include uninterruptible power supply and conditioning equipment, power transformers, and fire detection systems. Products serving the Industrial Technology industry include auto and bicycle components, data networking equipment, and fare collection and vending equipment.
In November 1994, the company adopted a plan to sell Leeds & Northrup, formerly a part of the Process Controls business sector, and Dynapower/Stratopower, formerly a part of the Industrial Technology business sector. In 1995, the Company sold the majority of these businesses. The remainder are expected to be sold or shut down in 1996.
During the last five years, the company invested approximately $440 million in cash and 4.4 million shares of common stock to acquire 20 businesses and/or product lines. The notes to the financial statements on pages 32 and 33 of the Shareholders' Report provide additional information for significant acquisitions during the last three years and are incorporated herein by reference.
Financial Information about Business Segments Selected business segment information for the last five fiscal years is summarized on page 35 of the Shareholders' Report and is incorporated herein by reference. There were no classes of similar products or services that exceeded 10 percent of consolidat ed sales.
A summary of information by geographic area for the last five fiscal years is included on page 36 of the Shareholders' Report and is incorporated herein by reference.
Narrative Description of Business
Major Markets and Products and Method of Distribution A description of the registrant's business is included on pages 6 and 7 of the Shareholders' Report and is incorporated herein by reference. The company's products are sold by its own sales organization and through distributors and manufacturers' representatives.
Materials and Supplies The company manufactures many of the components used in its products, but it also purchases a variety of basic materials and component parts. Although some basic materials and components have been and may be in short supply from time to time, the company believes that generally it will be able to obtain adequate supplies of major items or reasonable substitutes.
Patents The company holds many patents and has continued to secure other patents that cover many of its products. While patents are important in the aggregate to the company's competitive position, the loss of any single patent, patent application or patent license agreement, or group thereof, would not materially affect the conduct of its business as a whole. The company is both a licensor and licensee of patents.
Working Capital A discussion of working capital is included on pages 19 and 20 of the Shareholders' Report and is incorporated herein by reference.
Backlog The amount of unfilled orders was approximately $435.8 million as of December 31, 1995 and $307.2 million as of December 31, 1994 (excluding unfilled orders of businesses sold or discontinued). All unfilled orders are expected to be filled within the next succeeding year.
Competition Although the businesses of the company are highly competitive, the competitive position cannot be determined accurately in the aggregate or by segment since none of its competitors offers all of the same product lines or serves all of the same markets, nor are reliable comparative figures available for its competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are price, service, product performance and technical innovation. These methods vary with the type of product sold. The company believes that it can compete effectively on the basis of each of these factors as they apply to the various products offered.
Research and Development Research and development information for the last three years is included on page 36 of the Shareholders' Report and is incorporated herein by reference.
Environmental Matters The company is involved in various stages of investigation and remediation relative to environmental protection matters, arising from its own initiative, from indemnification of purchasers of divested operations, or from legal or administrative proceedings, some of which involve waste disposal sites. The company has a comprehensive environmental compliance program which includes environmental audits conducted by internal and outside independent environmental professionals and regular communications with the company's operating units regarding environmental compliance requirements and anticipated regulations.
Pursuant to the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the company has been notified that it has been named as a potentially responsible party ("PRP") at 34 CERCLA sites which are listed on the National Priorities List ("NPL") maintained by the U.S. Environmental Protection Agency ("EPA"). The law governing CERCLA sites provides that PRPs may be jointly and severally liable for the total costs of investigation and remediation. Based on information available to the company, at five of these sites (Byron Barrell in Byron, NY; Iron Horse Park in Billerica, MA; M.T. Richards in Crossville, IL; Doepke-Holliday in Holliday, KS; and North Penn Water Authority in Montgomery Co., PA), the company believes that its aggregate probable remaining liability will not exceed $3.0 million. At five sites (Berks Associates in Douglasville, PA;
Commercial Oil Services in Oregon, OH; West KL in Kalamazoo, MI; Spectron in Elkton, MD; and Stringfellow in Riverside, CA) the company is of the opinion, based on information currently available, that it contributed less than one percent of the total volume, weight or other allocation criteria at each site and the company believes its aggregate probable remaining liability for these sites will not exceed $350,000. At 16 of the remaining 24 CERCLA NPL sites, the company has resolved its liability by entering into de minimis settlements or buy-out agreements with either the EPA or PRP groups and paying its proportionate share of costs of site investigation and remediation (at an aggregate cost to the company of less than $600,000). The company believes, based on information currently available, that it has no liability at seven CERCLA NPL sites since the company's investigation has not revealed either a record of its having transported or arranged for disposal of hazardous substances to such sites or verifiable evidence of its responsibility for the release or threatened release of hazardous substances at these sites, but the company believes that it could incur future costs (including legal expenses) related to the foregoing which would not exceed approximately $100,000 in the aggregate. Finally, the company received a contractual indemnification claim with respect to a CERCLA NPL site (Cork Street, Kalamazoo Co., MI). No information regarding the company's involvement at such site is currently available.
The company has also received requests for information from the EPA at nine NPL sites for which the company believes, based on its investigation of such matters, that its potential aggregate remaining liability will not exceed $200,000.
The company recently received a notification of potential liability from the EPA under the Toxic Substances Control Act of 1976 with respect to a multi-party site, which is not a CERCLA site, based on the company's alleged generation of toxic substances present at the site. The company's liability, based on currently available information, is estimated to be approximately $100,000. At six sites which are not CERCLA NPL sites, the company has been cited by the EPA with respect to removal actions. The company has entered into settlements and paid its proportionate share of costs at five of these sites, and the company believes that its probable remaining liability at the sixth site is less than $50,000.
The company has received notices of potential liability from various state environmental authorities pursuant to state environmental laws regarding ten multi-party sites based on the company's alleged generation of hazardous materials present at those sites. The company's liability has been resolved and satisfied at two sites and, based on the company's investigation, the company believes that its aggregate probable remaining liability at the eight other sites will not exceed $2.5 million. Although the company has received requests for information from state environmental authorities at two additional sites, the company's investigation has revealed no record of its having disposed of hazardous substances at, or arranged for transportation of hazardous substances to, such sites.
The company is engaged in site investigation and/or remediation at the following sites presently or formerly owned by the company:
New York Air Brake Landfill/Kelsey Creek Site In February 1990, the company entered into a consent order with the New York State Department of Environmental Conservation ("NYSDEC") to conduct an investigation and remediation at the company's discontinued New York Air Brake facility in Watertown, New York. On March 30, 1994, NYSDEC issued a Record of Decision ("ROD") with respect to site remediation. The remedial action will consist of consolidation of contamination in the existing industrial landfill, capping the landfill, collecting contaminated groundwater downgradient of the landfill, and the removal of certain sediments in Kelsey Creek and a tributary creek. The future cost estimated by the company for site remediation is approximately $11 million. The company has filed litigation against the City of Watertown to challenge an increase in sewer discharge fees for leachate at the landfill and believes that it will ultimately prevail in such litigation.
Hevi-Duty Facility In August 1990, the EPA placed this manufacturing facility of the company, located in Goldsboro, North Carolina, on the NPL; subsequently, the company challenged the listing and the EPA delisted the facility in June 1993. Following the delisting, the company investigated site contamination at this facility and conducted limited initial remediation. The company is participating in a voluntary clean-up program of the state of North Carolina and has entered into an Administrative Order on Consent with the North Carolina Department of Environmental Health and Natural Resources. The company currently believes that the probable aggregate remaining liability for clean-up of this site will be approximately $3 million.
Fairbanks Morse Facility On December 2, 1994, the company acquired Fairbanks Morse, Inc. Based on the company's pre-acquisition environmental assessment and site testing performed at the Fairbanks Morse facility located in Kansas City, Kansas, the company determined that there is soil and groundwater contamination at the site. The company has entered into an Interim Agreement with the Kansas Department of Environment and Health with respect to additional site investigation. The company believes that up to $5 million could be required to investigate and remediate contaminated soil and groundwater at the site. The company is accounting for the foregoing, and for any liability of Fairbanks Morse at the Doepke-Holliday and Stringfellow sites discussed above, under purchase accounting.
The company has reported site contamination to environmental authorities with respect to eight sites which the company formerly owned or operated. The company is undertaking site investigations and remediations at seven of those sites and site investigations at one site. The company believes that the probable aggregate remaining liability for investigation and remediation will not exceed approximately $1.4 million. At one present manufacturing facility and two former manufacturing facilities, the company is performing voluntary site investigation and remediation at a remaining cost not estimated to exceed approximately $600,000, based on information currently available.
It is the company's policy not to offset expected insurance recoveries against expected obligations when determining the amount of environmental accruals.
The potential costs related to the matters described above and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of clean-up technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the company's responsibility. In management's opinion, after considering reserves established for such purposes, remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material adverse impact on the company's results of operations or financial position.
Employees At December 31, 1995, the company had approximately 12,900 employees, excluding employees of businesses held for sale. Approximately 2,600 employees are represented by 33 different collective bargaining units. The company has generally experienced satisfactory labor relations at its various locations.
Executive Officers of the Registrant
Name, Position, Age at December 31 and Other Information Age - -------------------------------------------------------------------------------- Michael D. Lockhart...................................................... 46 Chairman and Chief Executive Officer since October 19, 1995. Previously President and Chief Operating Officer since October 3, 1994. Prior to joining the company, Vice President and General Manager of General Electric's Commercial Engines and Services division, along with several other key executive positions at GE. Prior to joining GE, served as vice president and director, The Boston Consulting Group.
Terence D. Martin........................................................ 52 Executive Vice President and Chief Financial Officer since February 2, 1995. Previously, Chief Financial Officer of American Cyanamid Company since 1991 and Treasurer since 1988.
Elizabeth D. Conklyn..................................................... 48 Senior Vice President Human Resources since December 14, 1995. Previously, Senior Vice President, Human Resources and Organization for Mobile Telecommunications Technologies since 1994. Served in various human resource management positions with IBM from 1977 to 1994.
William W. Clark......................................................... 54 Vice President - Sourcing since June 15, 1995. Previously, Vice President - Operations of Tau-tron unit since 1992. Served in various management positions with Eastman Kodak Company from 1968 to 1992.
Nino J. Fernandez........................................................ 54 Vice President - Investor Relations since May 1, 1987. Previously, Director of Communications since 1974.
Terry J. Mortimer........................................................ 50 Vice President and Controller since May 25, 1990. Previously Director Finance and Chief Accountant for Apple Computer since June, 1988. Previously with Becton Dickinson and Company from January, 1981 to June, 1988, most recently as Medical Sector Controller.
Edgar J. Smith, Jr....................................................... 61 Vice President, General Counsel, and Secretary since April 19, 1984, and Vice President and General Counsel since January 1, 1980. Previously, Assistant General Counsel since 1967.
Thomas E. Taylor......................................................... 49 Vice President - Taxes since September 1, 1993. Previously with Elf Aquitaine, Inc. as Vice President - Taxes since 1985.
Julian B. Twombly........................................................ 49 Vice President and Treasurer since December 17, 1991. Prior to joining the company, associated with United Dominion Industries, Ltd. since 1974, most recently as Senior Vice President and Treasurer.
The executive officers are elected annually by the Board of Directors.
There are no family relationships between any of the directors or executive officers of the company.
Item 2.

Item 2. Properties
The Process Controls sector's operations consist of 27 manufacturing facilities in 11 states and eight foreign countries, containing approximately 2.9 million square feet, of which 91 percent is owned and nine percent is leased. The Electrical Controls sector's operations consist of 39 manufacturing facilities in 14 states and seven foreign countries, containing approximately 3.4 million square feet, of which approximately 72 percent is owned and 28 percent is leased. The Industrial Technology sector's operations consist of 11 manufacturing facilities in four states, containing approximately 0.9 million square feet, of which approximately 88 percent is owned and 12 percent is leased.
In addition to manufacturing plants, the company as lessee occupies executive offices in Stamford, Connecticut, and various sales and service locations throughout the world. All of these properties, as well as the related machinery and equipment, are considered to be well maintained, suitable and adequate for their intended purposes. Assets subject to lien are not significant.
As a result of business divestitures and restructuring activities, the company holds 1.7 million square feet of idle facilities and facilities related to discontinued operations for sale or sublease.
Item 3.

Item 3. Legal Proceedings
The company and certain of its subsidiaries are defendants in legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
None.
Part II - ------- Item 5.

Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
The company's common stock is listed on the New York and Pacific stock exchanges under the symbol "GSX". Information as to quarterly prices for the last two years, and dividends paid is included on pages 24 and 37 of the Shareholders' Report and is incorporated herein by reference. There were approximately 14,400 holders of record of the company's common stock on March 15, 1996.
Item 6.

Item 6. Selected Financial Data
Selected financial data of the company for the last five fiscal years are incorporated herein by reference to pages 38 and 39 of the Shareholders' Report.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results of Operations" appears on pages 17 through 20 of the Shareholders' Report and is incorporated herein by reference.
Item 8.

Item 8. Financial Statements and Supplementary Data
The financial statements and related notes are incorporated herein by reference to pages 22 through 37 of the Shareholders' Report. Quarterly financial information is incorporated herein by reference to page 37 of the Shareholders' Report. The Report of Independent Auditors, dated January 25, 1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, is incorporated herein by reference to page 21 of the Shareholders' Report.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Part III - -------- Item 10.

Item 10. Directors and Executive Officers
This information is incorporated herein by reference to pages 5 through 10 of the Proxy Statement for the 1996 annual meeting of shareholders. Also see page 3 of this 10-K as to information related to executive officers.
Item 11.

Item 11. Executive Compensation
This information is incorporated by reference to pages 11 through 20 of the Proxy Statement for the 1996 annual meeting of shareholders.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to pages 2 through 4 of the Proxy Statement for the 1996 annual meeting of shareholders.
Item 13.

Item 13. Certain Relationships and Related Transactions
Not applicable.
Part IV - ------- Item 14.

Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) (1) Financial Statements and Other Financial Data.
The financial statements of the company and consolidated subsidiaries are incorporated herein by reference to pages 22 through 37 of the Shareholders' Report. The Independ-ent Auditors' Report of Ernst & Young LLP, dated January 25, 1996, except for the capital stock note to the financial statements, as to which the date is February 1, 1996, is incorporated herein by reference to page 21 of the Shareholders' Report.
Page
(2) Schedule II Valuation and Qualifying Accounts...................... 8
All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes.
(3) Exhibits.
3.1 Restated Certificate of Incorporation of General Signal Corporation, as amended through April 21, 1994 incorporated herein by reference to Exhibit 3.1 of the registrant's 1994 10-K filed March 21, 1995.
3.2 By-laws of General Signal Corporation, as amended through February 1, 1996.
4.1 Copies of the instruments with respect to the company's long-term debt are available to the Securities and Exchange Commission upon request.
4.2 Copies of the Credit Agreements among General Signal Corporation and Various Commercial Banking Institutions, through June 1, 1995, as described in the Notes to Financial Statements incorporated herein by reference in (a)(1) above, are available to the Securities and Exchange Commission upon request.
10.1 Description of General Signal Corporation Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.1 of the registrant's 1991 Form 10-K filed March 25, 1992.
10.2 Retirement Plan for Directors of General Signal Corporation is incorporated herein by reference to Exhibit 10.7 of the registrant's 1988 Form 10-K filed March 17, 1989.
10.3 General Signal Corporation Change in Control Severance Pay Plan, as amended, is incorporated herein by reference to Exhibit 10.8 of the registrant's 1989 Form 10-K filed March 16, 1990.
10.4 General Signal Corporation Deferred Compensation Plan, dated October 14, 1993, is incorporated herein by reference to Exhibit 10.4 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.5 General Signal Corporation Benefit Equalization Plan as amended and restated October 14, 1993, is incorporated herein by reference to Exhibit 10.5 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.6 General Signal Corporation 1992 Stock Incentive Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.6 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.7 General Signal Corporation 1989 Stock Option and Incentive Plan as amended July 7, 1993, is incorporated herein by reference to Exhibit 10.7 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.8 General Signal Corporation 1985 Stock Option Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.8 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.9 General Signal Corporation 1981 Stock Option Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.9 of the registrant's 1993 Form 10-K filed March 21, 1994.
10.10 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994 is incorporated herein by reference to exhibit 10.12 of the registrant's 1994 Form 10-K filed March 21, 1995.
10.11 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995 is incorporated herein by reference to exhibit 10.13 of the registrant's 1994 Form 10-K filed March 21, 1995.
10.12 Severance agreement between Edmund M. Carpenter and the registrant dated October 19, 1995.
10.13 Severance agreement between Joel S. Friedman and the registrant dated December 21, 1995.
10.14 Severance agreement between George Falconer and the registrant dated November 7, 1995.
10.15 Shareholder Rights Plan dated February 1, 1996.
11.0 Computation of Earnings per Share. See page 9 of this report.
12.0 Calculation of Ratios of Earnings to Fixed Charges. See page 10 of this report.
13.0 1995 Annual Report to Shareholders. Except for those portions specifically incorporated herein by reference, the company's 1995 Annual Report to Shareholders is furnished for the information of the Commission and is not deemed to be "filed." Pages 17 through 39, including the Independent Auditors' Report on page 21, are specifically incorporated herein by reference.
21.0 Subsidiaries. See pages 10 through 12 of this report.
23.0 Consent of Ernst & Young LLP. See page 13.
27 Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
A report on Form 8-K was filed on November 2, 1995, reporting the resignation of Edmund M. Carpenter as chairman, chief executive officer and director of the registrant.
Signatures
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
General Signal Corporation
/s/ Michael D. Lockhart - ------------------------------ (Michael D.Lockhart, Chairman) March 21, 1996
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.
/s/ Michael D. Lockhart - ------------------------------ (Michael D. Lockhart) March 21, 1996 Chairman and Director (Principal Executive Officer)
/s/ Terence D. Martin - ------------------------------ (Terence D. Martin) March 21, 1996 Executive Vice President and Chief Financial Officer
/s/ Terry J. Mortimer - ------------------------------ (Terry J. Mortimer) March 21, 1996 Vice President and Controller (Chief Accounting Officer)
/s/ Ralph E. Bailey - ------------------------------ (Ralph E. Bailey) March 21, 1996 Director
/s/ Van C. Campbell - ------------------------------ (Van C. Campbell) March 21, 1996 Director
/s/ Ursula F. Fairbairn - ------------------------------ (Ursula F. Fairbairn) March 21, 1996 Director
/s/ Ronald E. Ferguson - ------------------------------ (Ronald E. Ferguson) March 21, 1996 Director
/s/ John P. Horgan - ------------------------------ (John P. Horgan) March 21, 1996 Director
/s/ Roland W. Schmitt - ------------------------------ (Roland W. Schmitt) March 21, 1996 Director
/s/ John R. Selby - ------------------------------ (John R. Selby) March 21, 1996 Director


Item 1. BUSINESS
There are no patents, trademarks, franchises or concessions held by the Registrant. Software licenses held by the Registrant are considered ordinary and replaceable. Although the Registrant has individual customers that comprise more than 10% of its total annual revenues, the Registrant does not consider the loss of any individual customer to have a material adverse effect on the Registrant due to the demand for the Registrant's services and for the services of the industry in which the Registrant competes. Competitors of the Registrant consist primarily of subsidiary companies of large corporations. Services provided by competitor companies other than provided by the Registrant may include marine geophysics, speculative acquisition of seismic data, a library of seismic data, or a combination of these factors. The Registrant considers price and quality of service to be its principal methods of competition. Indicative of its level of commitment to the proprietary data of its customers, the Registrant does not maintain a library of seismic data or participate in speculative seismic data acquisition. Although the business of the Registrant is not considered seasonal, it does depend on favorable weather.
Additional information required by this Item 1 is hereby incorporated by reference to the Registrant's 1995 Annual Report (first page after front cover, page 2 and page 21) filed or to be filed by the Registrant with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities and Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this Form 10-K. (Exhibit 13 hereto.)
Item 2.

Item 2. PROPERTIES
The principal facilities of the Registrant are summarized in the table below.
The Registrant owns additional undeveloped real property consisting of approximately 21,000 square feet in Midland, Texas, adjacent to the headquarters office building.
The Registrant operates only in one industry segment and only in the United States.
Item 3.

Item 3. LEGAL PROCEEDINGS
On July 1, 1995, an automobile accident claimed the lives of four employees which involved an automobile owned by the Company. The Company is a defendant in a lawsuit filed by the families of two of the employees whose deaths resulted from the accident. The families filed suit against the Company under the gross negligence provisions of the Texas Workers' Compensation Act. Accordingly, the Company believes its exposure is limited to exemplary damages of $36 million. The litigation is currently in the discovery stage. The Company has approximately $12 million of insurance coverage available to provide against an unfavorable outcome in this matter. Due to the uncertainties inherent in litigation, no absolute assurance can be given as to the ultimate outcome of this suit. However, the Company believes, based on knowledge of the facts to date and consultation with its legal advisors, that liabilities, if any, from this suit should not have a material adverse effect on the Company's financial position.
The Company is party to other legal actions arising in the ordinary course of its business, none of which management believes will result in a material adverse effect on the Company's financial position or results of operations, as the Company believes it is adequately insured.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted during the fourth quarter of the 1995 fiscal year to a vote of security holders, through the solicitation of proxies or otherwise. However, please refer to the Registrant's Proxy Statement dated November 10, 1995, filed or to be filed with the Commission no later than 120 days after the end of the fiscal year covered by this Form 10-K, notifying as to the election of Directors and selection of KPMG Peat Marwick LLP as independent public accountants of the Company (requiring an affirmative vote of a majority of shares present or represented by proxy), at the Annual Meeting to be held on January 9, 1996.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item 5 is hereby incorporated by reference to the Registrant's 1995 Annual Report (page 28, "Common Stock Information") referred to in Item 1 above.
Item 6.

Item 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is hereby incorporated by reference to the Registrant's 1995 Annual Report (page 1, "Financial Highlights") referred to above in Item 1.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this Item 7 is hereby incorporated by reference to the Registrant's 1995 Annual Report (pages 14 to 16) referred to in Item 1.
Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent public accountants appearing on page 27 and the financial statements appearing on pages 17 through 26 of Registrant's 1995 Annual Report for the year ended September 30, 1995, referred to above in Item 1, are incorporated herein by reference.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 with respect to Directors and Executive Officers is hereby incorporated by reference to the Registrant's Proxy Statement dated November 10, 1995 (page 2) filed or to be filed by the Registrant with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities and Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this Form 10-K.
Item 11.

Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is hereby incorporated by reference to the Registrant's Proxy Statement (page 3) referred to above in Item 10.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 with respect to security ownership of certain beneficial owners is hereby incorporated by reference to the Registrant's Proxy Statement (page 5, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS") referred to above in Item 10.
The information required by this Item 12 with respect to security ownership of management is hereby incorporated by reference to the Registrant's Proxy Statement (page 5, "SECURITY OWNERSHIP OF MANAGEMENT") referred to above in Item 10.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of the Registrant, included in pages 17 through 26 of the Registrant's 1995 Annual Report to Shareholders for the year ended September 30, 1995, and the Independent Auditors' Report on page 27 of such report, are incorporated herein by reference:
Description
Balance Sheets, September 30, 1995 and 1994
Statements of Operations For the Years Ended September 30, 1995, 1994 and 1993
Statements of Cash Flows For the Years Ended September 30, 1995, 1994 and 1993
Statements of Stockholders' Equity For the Years Ended September 30, 1995, 1994 and 1993
Notes to Financial Statements
Independent Auditors' Report
(a) 2. All schedules are omitted because they are not applicable, not required or because the required information is included in the financial statements or notes thereto.
(a) 3. Exhibits
The exhibits and financial statement schedules filed as a part of this report are listed below according to the number assigned to it in the exhibit table of Item 601 of Regulation S-K:
(3) Restated Articles of Incorporation and Bylaws.
(4) Instruments defining the rights of security holders, including indentures.
(9) Voting Trust Agreement -- None; consequently, omitted.
(10) Material Contracts.
(11) Statement re: computation of per share earnings -- Not Applicable.
(12) Statement re: Computation of ratios -- Not Applicable.
(13) 1995 Annual Report.
(18) Letter re: change in accounting principles -- Not Applicable.
(19) Previously unfiled documents -- No documents have been executed or in effect during the reporting period which should have been filed; consequently, this exhibit has been omitted.
(22) Subsidiaries of the Registrant -- There are no subsidiaries of the Registrant; consequently, this exhibit has been omitted.
(23) Published report regarding matters submitted to vote of security holders -- None; consequently, omitted.
(24) Consent of experts and counsel -- Not applicable.
(25) Power of Attorney -- There are no signatures contained within this report pursuant to a power of attorney; consequently, this exhibit has been omitted.
(b) Reports on Form 8-K
The Registrant has not filed any reports on Form 8-K during the last quarter of the year ended September 30, 1995.
(27) Financial Data Schedule.
(28) Additional Exhibits -- None.
(29) Information from reports furnished to state insurance regulatory authorities -- None.
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, in the City of Midland, and the State of Texas, on the 10th day of November, 1995.
DAWSON GEOPHYSICAL COMPANY
By: /s/ L. Decker Dawson -------------------------------- L. Decker Dawson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the date indicated.
EXHIBIT INDEX
*This exhibit is not required to be filed in accordance with Item 601 of Regulation S-K.
**Incorporated by reference to Registrant's Form 10-K, dated September 30, 1994 (Commission File No. 0-10144).