-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oxZpNF56la6etAI7KFN80/dsTN3l/VKTi/QqpNADtGXeDS11CGqA2A75CIF1Jsq9 wDIpUxUqMro6nPv19YCyPw== 0000040834-95-000006.txt : 19950616 0000040834-95-000006.hdr.sgml : 19950616 ACCESSION NUMBER: 0000040834-95-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950321 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 160445660 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 95522154 BUSINESS ADDRESS: STREET 1: ONE HIGH RIDGE PARK CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2033578800 MAIL ADDRESS: STREET 1: P O BOX 10010 CITY: STAMFORD STATE: CT ZIP: 06904 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL RAILWAY SIGNAL CO DATE OF NAME CHANGE: 19710926 10-K 1 U.S. Securities and Exchange Commission Washington, DC 20549 General Signal Corporation 1994 Form 10-K X Annual Report Pursuant to Section 13 or 15(d) of --- The Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1994 or --- Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File No. 1-996 General Signal Corporation Box 10010 High Ridge Park, Stamford, Connecticut 06904 Telephone Number (203) 329-4100 IRS Employer Identification No. 16-0445660 State of Incorporation: New York Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock New York Stock Exchange par value $1.00 (Par value reduced Pacific Stock Exchange from $6.67 effective April 21, 1969) 5.75% Convertible New York Stock Exchange Subordinated Debentures due June 1, 2002 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes_X_No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K._X The aggregate market value of voting stock held by non-affiliates as of March 2, 1995 was approximately $1.7 billion. As of March 2, 1995, there were 47.3 million shares of General Signal Corporation common stock outstanding. Documents incorporated by reference Part Annual Report to Shareholders for the Fiscal Year Ended December 31, 1994 I, II, IV Proxy Statement for 1995 Annual Meeting III Note: Some of the information required in this Form 10-K report (10-K) was presented in the General Signal Corporation 1994 Annual Report to Shareholders (Shareholders' Report) and is incorporated herein by reference. A complete copy of the Shareholders' Report is bound on the outside of this 10-K to facilitate reference. Except for those sections specifically referred to as being incorporated herein by reference, the Shareholders' Report shall not be deemed to be "filed" as part of this 10-K. The registrant is also referred to as "the company." Table of Contents Item Page 1. Business ...................................1 2. Properties .................................4 3. Legal Proceedings ..........................4 4. Submission of Matters to a Vote of Security Holders ...................4 5. Market for the Registrant's Common Stock and Related Shareholder Matters ......4 6. Selected Financial Data ....................4 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................4 8. Financial Statements and Supplementary Data .........................5 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...................5 10. Directors and Executive Officers ...........5 11. Executive Compensation .....................5 12. Security Ownership of Certain Beneficial Owners and Management ...........5 13. Certain Relationships and Related Transactions .......................5 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K ..........5 1 Part I Item 1. Business General Developments General Signal Corporation, incorporated in New York in 1904, produces industrial valves and mixers; pumps; other equipment for industrial automation, electrical energy management, telecommunications transmission, and transportation; and test and measurement equipment. The company serves these markets through three product sectors: Process Controls, Electrical Controls and Industrial Technology. 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. The company expects to sell these businesses during 1995. During the last five years, the company invested approximately $307 million in cash and common stock (2.6 million shares) to acquire 24 businesses and/or product lines. The notes to the financial statements on page 29 of the Shareholders' Report provide additional information for 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 31 of the Shareholders' Report and is incorporated herein by reference. There were no classes of similar products or services that exceeded 10 percent of consolidated sales. A summary of information by geographic area for the last five fiscal years is included on page 32 of the Shareholders' Report and is incorporated herein by reference. Narrative Description of Business Major Markets and Products and Method of Distribution A narrative description of the registrant's business is included on pages 4 through 13 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 16 and 17 of the Shareholders' Report and is incorporated herein by reference. Backlog The amount of unfilled orders was approximately $307.2 million as of December 31, 1994 and $300.4 million as of December 31, 1993 (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 33 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 2 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 $2.5 million. At six sites (Aquatech in Greer, SC; 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 1% 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 15 of the remaining 22 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 $500,000). The company believes, based on information currently available, that it has no liability at seven such 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 recently 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 seven NPL sites for which the company believes, based on its investigation of such matters, that its potential aggregate remaining liability will not exceed $100,000. 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 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") requiring site remediation at a cost of $8.1 million. The remedial action will consist of consolidation of contamination in the existing industrial landfill, capping the landfill and collecting contaminated groundwater downgradient of the landfill. The ROD also proposed the removal of certain sediments in Kelsey Creek and a tributary creek at an additional cost estimated by the company at approximately $1.75 million; the company has submitted a risk assessment for review by the NYSDEC recommending no action since the company's risk assessment of the creeks showed no adverse impacts from sediments. At the request of NYSDEC, the company is conducting a survey of soft sediments which will be the basis for future discussions regarding Kelsey Creek and its tributaries. 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 prepared a remedial plan. The company has informed the State of North Carolina that it seeks participation in a voluntary clean-up program and has negotiated the terms of 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. 3 General Railway Signal Facility In 1990, the company's pre-divestiture investigation of this facility, located in Rochester, New York, identified certain areas which may have been contaminated with hazardous substances. Remediation is being conducted at the site. The company currently believes that the probable aggregate remaining liability for remediation of this site will be approximately $1 million. Fairbanks Morse Facility On December 2, 1994, the company acquired Fairbanks Morse, Inc. Based on the pre-acquisition environmental assessment and site testing performed at the Fairbanks Morse facility located in Kansas City, Kansas, the company will spend an estimated $525,000 for various environmental matters, including investigation of site soil and groundwater contamination and remediation of oil-contaminated soil. It is possible that an additional $2 million to $5 million could be required for remediation of contaminated groundwater if the Kansas Department of Environment and Health, based on the site investigation, decides that existing groundwater contamination at the facility is not attributable to the neighboring contaminated property. 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 seven sites which the company formerly owned or operated. The company is undertaking site investigations and remediations at six 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 one former manufacturing facility, the company is performing voluntary site investigation and remediation at a remaining cost not estimated to exceed approximately $225,000, 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, 1994, the company had approximately 12,200 employees, excluding employees of businesses held for sale. Approximately 2,900 employees are represented by 36 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 Edmund M. Carpenter ........................................................53 Chairman and Chief Executive Officer since May 1, 1988. Previously, Director, President and Chief Operating Officer of ITT Corporation since 1985. Prior to joining ITT Corporation in 1981, President of Kelsey-Hayes Company, a subsidiary of Fruehauf Corporation. Michael D. Lockhart ........................................................45 President and Chief Operating Officer since October 3, 1994. Previously, 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 ..........................................................51 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. Joel S. Friedman ...........................................................57 Senior Vice President Operations since March 1, 1987. Previously, Group Executive and President of Lightnin, a unit of General Signal, since 1984 and President of O-Z/Gedney, a unit of General Signal, since 1975. George Falconer ............................................................62 Vice President Human Resources since October 23, 1986. Previously, Director of Human Resources since 1981, Director of Industrial Relations since 1977, and Corporate Director of Personnel Relations since 1976. Associated with Metal Forge, a unit of General Signal, since 1970, most recently as Vice President Employee Relations. Nino J. Fernandez ..........................................................53 Vice President Investor Relations since May 1, 1987. Previously, Director of Communications since 1974. Name, Position, Age at December 31 and Other Information Age 4 Executive Officers of the Registrant Name, Position, Age at December 31 and Other Information Age Philip A. Goodrich .........................................................38 Vice President Corporate Development since December 12, 1991. Previously, Director of Corporate Development since May, 1989 and Assistant Treasurer since May, 1987. Prior to joining the company, associated with Joseph E. Seagram & Sons, Inc. since 1981, most recently as Assistant Treasurer. Darryl A. Littleton ........................................................45 Vice President Manufacturing since February 5, 1992. Previously, Senior Partner and Director of Ingersoll Engineers, Inc. since 1984. Terry J. Mortimer 49 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. ........................................................60 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 ...........................................................48 Vice President Taxes since September 1, 1993. Previously with Elf Aquitaine, Inc. as Vice President Taxes since 1985. Julian B. Twombly ..........................................................48 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. Properties The Process Controls sector's operations consist of 27 manufacturing facilities in 12 states and 8 foreign countries, containing approximately 2.9 million square feet, of which 94 percent is owned and 6 percent is leased. The Electrical Controls sector's operations consist of 30 manufacturing facilities in 14 states and 4 foreign countries, containing approximately 2.7 million square feet, of which approximately 69 percent is owned and 31 percent is leased. The Industrial Technology sector's operations consist of 11 manufacturing facilities in 8 states, containing approximately 0.9 million square feet, of which approximately 79 percent is owned and 21 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 recent business divestitures and restructuring activities, the company holds 1.4 million square feet of idle facilities and facilities related to discontinued operations for sale or sublease. 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. Submission of Matters to a Vote of Security Holders None. Part II 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 21 and 32 of the Shareholders' Report and is incorporated herein by reference. There were approximately 10,330 holders of record of the company's common stock on March 2, 1995. Item 6. Selected Financial Data Selected financial data of the company for the last five fiscal years are incorporated herein by reference to page 34 of the Shareholders' Report. 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 14 through 17 of the Shareholders' Report and is incorporated herein by reference. 5 Item 8. Financial Statements and Supplementary Data The financial statements and related notes are incorporated herein by reference to pages 19 through 33 of the Shareholders' Report. Quarterly financial information is incorporated herein by reference to page 32 of the Shareholders' Report. The Report of Independent Auditors, dated January 27, 1995, is incorporated herein by reference to page 18 of the Shareholders' Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Part III Item 10. Directors and Executive Officers This information is incorporated herein by reference to pages 5 through 7 of the Proxy Statement for the 1995 annual meeting of shareholders. Also see page 3 of this 10-K as to information related to executive officers. Item 11. Executive Compensation This information is incorporated by reference to pages 11 through 18 of the Proxy Statement for the 1995 annual meeting of shareholders. 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 1995 annual meeting of shareholders. Item 13. Certain Relationships and Related Transactions Not applicable. Part IV 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 19 through 33 of the Shareholders' Report. The Independent Auditors' Report of Ernst & Young, LLP, dated January 27, 1995, is incorporated herein by reference to page 18 of the Shareholders' Report. Page (2) Schedule II Valuation and Qualifying Accounts ......................9 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. 3.2 By-laws of General Signal Corporation, as amended through March 16, 1995. 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, as amended through January 12, 1995, as described in the Notes to Financial Statements incorporated herein by reference in (a)(1) above, are available to the Securities and Exchanges 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. 6 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 Consulting Agreement with Nathan R. Owen is incorporated herein by reference to Exhibit 10.10 of the registrant's 1986 Form 10-K filed March 30, 1987. 10.11 Employment agreement between Edmund M. Carpenter and the registrant dated April 15, 1988 is incorporated herein by reference to Exhibit 10.12 of the registrant's 1988 Form 10-K filed March 17, 1989. 10.12 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994. 10.13 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995. 10.14 Severance agreement between Peter A. Laing and the registrant dated January 9, 1995. 10.15 Severance agreement between Stephen W. Nagy and the registrant dated January 13, 1995. 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 1994 Annual Report to Shareholders. Except for those portions specifically incorporated herein by reference, the company's 1994 Annual Report to Shareholders is furnished for the information of the Commission and is not deemed to be "filed." Pages 14 through 34, including the Independent Auditors' Report on page 18, 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 inside back cover of this report. (b) Reports on Form 8-K. No reports were filed on Form 8-K. 7 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/ Edmund M. Carpenter (Edmund M. Carpenter, Chairman) March 17, 1995 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/ Edmund M. Carpenter (Edmund M. Carpenter) March 17, 1995 Chairman and Director (Principal Executive Officer) /s/ Michael D. Lockhart (Michael D. Lockhart) March 17, 1995 President and Chief Operating Officer and Director /s/ Terence D. Martin (Terence D. Martin) March 17, 1995 Executive Vice President and Chief Financial Officer /s/ Terry J. Mortimer (Terry J. Mortimer) March 17, 1995 Vice President and Controller (Chief Accounting Officer) /s/ Ralph E. Bailey (Ralph E. Bailey) March 17, 1995 Director /s/ Van C. Campbell (Van C. Campbell) March 17, 1995 Director /s/ Ronald E. Ferguson (Ronald E. Ferguson) March 17, 1995 Director /s/ John P. Horgan (John P. Horgan) March 17, 1995 Director /s/ C. Robert Kidder (C. Robert Kidder) March 17, 1995 Director /s/ Richard J. Kogan (Richard J. Kogan) March 17, 1995 Director /s/ Nathan R. Owen (Nathan R. Owen) March 17, 1995 Director /s/ Roland W. Schmitt (Roland W. Schmitt) March 17, 1995 Director /s/ John R. Selby (John R. Selby) March 17, 1995 Director 8 Schedule II Valuation and Qualifying Accounts
Additions General Signal Corporation and charged Consolidated Subsidiaries Balance at (credited) Balance at Years Ended December 31, 1994, 1993 beginning to cost and end of and 1992 (In millions) of period expense Deductions period 1994 Reserves deducted from assets: Allowance for doubtful accounts $10.5 $4.5 $(4.9)(1) $10.1 ----- ---- ----- -- ----- Assets held for sale $14.4 $8.6 $(14.4)(3) $8.6 ----- ---- ------ -- ---- Dispositions and special items: Consolidation of operations and other $- $19.3 $(3.4)(4) $15.9 Transaction and consolidation of Revco 8.8 (1.5) (6.7)(4) 0.6 Semiconductor 13.3 (0.6) 5.4(4),(5) 18.1 Restructuring 13.0 (3.5) (7.0)(4) 2.5 ---- ---- ---- -- --- $35.1 $13.7 $(11.7) $37.1 ===== ===== ====== ===== 1993 Reserves deducted from assets: Allowance for doubtful accounts $8.9 $4.6 $(3.0)(1) $10.5 ---- ---- ----- -- ----- Assets held for sale $18.6 $- $(4.2)(3) $14.4 ----- - ----- -- ----- Dispositions and special items: Transaction and consolidation of Revco $- $13.2 $(4.4)(4) $8.8 Semiconductor 57.3 (53.2) 9.2(4),(6) 13.3 Restructuring - 30.5 (17.5)(4) 13.0 ---- ----- -- ---- $57.3 $(9.5) $(12.7) $35.1 ===== ===== ====== ===== 1992 Reserves deducted from assets: Allowance for doubtful accounts $11.1 $5.5 $(7.7)(1),(2) $8.9 ----- ---- ----- -- -- ---- Assets held for sale $- $18.6 $- $18.6 - ----- - ----- Semiconductor $- $67.0 $(9.7)(4) $57.3 - ----- ----- -- ----- (1) Write-off of bad debts, net of recoveries. Includes reclassifications in 1994 of discontinued operations to assets held for sale. (2) Includes transfer of semiconductor equipment operations allowance for doubtful accounts to assets held for sale at October 1, 1992. (3) Charges to reserve related to businesses divested during 1993 and 1994. (4) Charges to reserve for related costs incurred during the year. (5) Includes reclassification of $8.4 credit balance of GS Japan's cumulative translation adjustment as of December 31, 1994. (6) Includes $47.6 of excess proceeds on disposal of businesses divested during 1993.
EX-11 2 Computation of Earnings Per Share Exhibit (11.0)
General Signal Corporation and Consolidated Subsidiaries (In millions, except per-share data) Year Ended December 31, 1994 1993 1992 ---- ---- ---- I. Earnings (loss) per share of common stock (used for financial reporting): Continuing operations $104.1 $98.1 $6.3 Earnings (loss) from discontinued operations 2.4 (31.5) 6.1 Loss on disposal of discontinued operations (25.8) - - Extraordinary charges - (6.6) (0.3) Cumulative effect of accounting changes - (25.3) (92.4) ----- ----- ------ Net Earnings (loss) $80.7 $34.7 $(80.3) ===== ===== ====== Average number of common shares outstanding(a) 47.3 45.2 41.8 ==== ==== ==== Earnings (loss) per average share of common stock: Continuing operations $2.20 $2.17 $0.15 Earnings (loss) from discontinued operations 0.05 (0.70) 0.15 Loss on disposal of discontinued operations (0.54) - - Extraordinary charges - (0.14) (0.01) Cumulative effect of accounting changes - (0.56) (2.21) ----- ----- ------ $1.71 $0.77 $(1.92) ===== ===== ====== II. Primary earnings per share(b) (including common stock equivalents): Average number of common shares outstanding 47.3 45.2 41.8 Dilutive effect of outstanding options (as determined by application of the treasury stock method) 0.3 0.3 0.3 --- --- --- Total shares used in calculation of primary earnings per share 47.6 45.5 42.1 ==== ==== ==== Primary earnings (loss) per share: Continuing operations $2.19 $2.16 $0.15 Earnings (loss) from discontinued operations 0.05 (0.69) 0.15 Loss on disposal of discontinued operations (0.54) - - Extraordinary charges - (0.15) (0.01) Cumulative effect of accounting changes - (0.56) (2.20) ----- ----- ------ $1.70 $0.76 $(1.91) ===== ===== ====== III. Fully diluted earnings per share(b): Average number of shares used in calculation of primary earnings per share above 47.6 45.5 42.1 Additional dilutive effect of outstanding options (as determined by application of the treasury stock method) - - - ----- ----- ------ Total shares used in calculation of fully diluted earnings per share 47.6 45.5 42.1 ----- ----- ------ Fully diluted earnings (loss) per share: Continuing operations $2.19 $2.16 $0.15 Earnings (loss) from discontinued operations 0.05 (0.69) 0.15 Loss on disposal of discontinued operations (0.54) - - Extraordinary charges - (0.15) (0.01) Cumulative effect of accounting changes - (0.56) (2.20) ----- ----- ------ $1.70 $0.76 $(1.91) ===== ===== ====== (a) Excludes common stock equivalents in accordance with provisions of APB Opinion No. 15 because such equivalent shares result in dilution of less than 3%. (b) This calculation is presented in accordance with Regulation S-K although the effect of the options deemed to be common stock equivalents is antidilutive in 1992.
EX-12 3 Calculation of Ratios of Earnings to Fixed Charges Exhibit (12.0) General Signal Corporation
(Dollars in millions) Year Ended December 31, 1994 1993 1992 1991 1990 Earnings: Earnings (loss) from continuing operations before income taxes and extraordinary items $160.3 $139.1 $9.5 $97.4 $15.5 Add: fixed charges 20.2 22.6 35.3 39.3 46.4 ---- ---- ---- ---- ---- $180.5 $161.7 $44.8 $136.7 $61.9 ====== ====== ===== ====== ===== Fixed charges: Interest expense $14.4 $18.0 $28.6 $31.8 $37.2 One-third of rent expense 5.8 4.6 6.7 7.5 9.2 --- --- --- --- --- $20.2 $22.6 $35.3 $39.3 $46.4 ===== ===== ===== ===== ===== Ratio 8.94 7.15 1.27 3.48 1.33 ==== ==== ==== ==== ====
EX-21 4 Subsidiaries of Registrant 1. Consolidated Subsidiaries Exhibit (21.0) Percent Organized Under Owned the Laws of Subsidiaries of General Signal Corporation: Aurora/Hydromatic Pumps Inc. 100 Delaware Borri Elettronica Industriale S.r.l. 100 Italy DeZurik of Australia Proprietary Ltd. 100 Australia DeZurik Vertriebes GmbH 100 Austria Fairbanks Morse Pump Corporation 100 Kansas GCA International Corporation 100 New Jersey GS Building Systems Corporation 100 Connecticut Subsidiary of GS Building Systems Corporation: Dual-Lite Manufacturing, Inc. 100 Delaware General Signal FSC Inc. 100 Virgin Islands General Signal Holdings Company 100 Delaware Subsidiaries of General Signal Holdings Company: General Signal Technology Corporation 100 Delaware Subsidiaries of General Signal Technology Corporation: General Farebox Service of Atlanta, Inc. 100 Delaware General Signal Japan Corporation 100 Japan General Signal International Corporation 100 Delaware General Signal Limited 100 Ontario General Signal SEG Asia, Ltd. 100 Hong Kong General Signal SEG SARL 100 France General Signal UK Limited 100 England Subsidiaries of General Signal UK Limited: DeZurik International Ltd. 100 England GCA Limited 100 England G.S. Iona Ltd. 100 England General Signal SEG, Ltd. 100 England Leeds & Northrup Limited 100 England Lightnin Europe Limited 100 England Lightnin Mixers Limited 100 England Subsidiaries of Lightnin Mixers Ltd.: Deutsche Lightnin Jesse Mischtechnik Verwaltungsgesellschaft GmbH (Remaining 90 Germany 10% owned by General Signal Corporation) Turbo Maschinenbau GmbH 100 Germany Turbo Lightnin Mischtechnik GmbH & Co. KG 100 Germany Percent Organized Under Owned the Laws of Sola (UK) Limited 100 England Tau-Tron (UK) Limited 100 England Telenex Europe Limited 100 England Leeds & Northrup Company 100 Delaware Subsidiaries of Leeds & Northrup Company: Leeds & Northrup Australia Pty., Ltd. 100 Australia Subsidiary of Leeds & Northrup Australia Pty., Ltd.: Leeds & Northrup (New Zealand) Ltd. 100 New Zealand Leeds & Northrup GmbH 100 Germany Leeds & Northrup Mexicana, S.A. 100 Mexico Leeds & Northrup S.A. 100 Spain LDN, Ltd. 100 Delaware Subsidiaries of LDN, Ltd.: Leeds & Northrup (France) SARL 100 France L.D.N. Netherlands, B.V. 100 Netherlands L&N Singapore, Pte., Ltd. 100 Singapore Leeds & Northrup Italy, S.p.A. 53 Italy (47% owned by Leeds & Northrup Company) Lightnin China Mixers Co. Ltd. 100 China Lightnin Mixers Pty. Ltd. 60 Australia (Remaining 40% owned by General Signal Ltd.) Lightnin Pte. Ltd. 100 Singapore Metal Forge Company, Inc. 100 Delaware Shenyang Stock Electric Power Equipment Company, Limited100 China Sola Australia, Limited 100 Australia Sola Electric AG 100 Switzerland Subsidiary of Sola Electric AG: Borri Stromversorgunanlagen GmbH 100 Germany Stock Japan, Ltd. 100 Japan Telenex Corporation 100 New Jersey 2. Other Subsidiaries The following minor foreign subsidiaries and the investment in 50-percent-or-less owned companies, which are not material individually or in the aggregate in relation to the financial statements, are carried at cost plus equity in undistributed earnings since acquisition. Subsidiaries of General Signal Corporation: DeZurik - India 40 India DeZurik Japan Co., Ltd. 48 Japan DeZurik Mexico, S.A. de C.V. 49 Mexico General Signal Acquisition Corporation 100 Delaware General Signal Corporation 100 Delaware GSR Merger Sub Inc. 100 Delaware HMS Ventures Ltd. 14 California High Ridge Company, Limited 100 Bermuda Industrias Sola Basic, S.A. 49 Mexico Koyo Lindberg Ltd. 50 Japan New Signal, Inc. 100 Delaware Solamex, S.A. de C.V. 48 Mexico Subsidiaries of Solamex, S.A. de C.V.: Industrial GESCA S.A. de C.V. 99 Mexico Inmobiliaria S-Tres, S.A. de C.V. 99 Mexico Inmobiliaria S-Dos, S.A. de C.V. 99 Mexico Inmobiliaria Solamex, S.A. de C.V. 99 Mexico Productora Y Maquiladora Queretana S.A. de C.V. 99 Mexico Terasaki Nelson Ltd. 50 Japan EX-23 5 Consent of Ernst & Young LLP Exhibit (23.0) The Board of Directors and Shareholders General Signal Corporation We consent to the incorporation by reference in this Annual Report (Form 10-K) of General Signal Corporation of our report dated January 27, 1995, included in the 1994 Annual Report to Shareholders of General Signal Corporation. Our audits also included the financial statement schedule of General Signal Corporation and consolidated subsidiaries listed in Item 14(a). This schedule is the responsibility of the company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-3 No. 33-33929) pertaining to the universal shelf registration dated May, 1994, (Form S-8 No. 33-46613) pertaining to the General Signal Corporation Savings and Stock Ownership Plan, (Form S-8 No. 33-47495) pertaining to General Signal Corporation's stock incentive plans, (Form S-4 No. 33-50081) pertaining to the merger agreement with Revco Scientific, Inc. and related prospectuses of our report dated January 27, 1995, with respect to the financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of General Signal Corporation. /s/ Ernst & Young LLP Stamford, Connecticut March 17, 1995 EX-3.2 6 GENERAL SIGNAL CORPORATION __________ BY-LAWS __________ As Amended Through March 16, 1995 ARTICLE I SHAREHOLDERS' MEETING SECTION 1. Annual Meeting: The Annual Meeting of the shareholders of this Corporation for the election of directors and the transaction of such other business as may properly come before such meeting shall be held each year on such date and at such time and place, whether within or without the State of New York, as shall be determined by the Board of Directors. SECTION 2. Special Meeting: A Special Meeting of the shareholders may be held at any time upon the call of the Board of Directors or the Chairman of the Board and shall be called by the Secretary at the written request of shareholders owning at least two-thirds of the outstanding shares of stock entitled to vote, which request shall specify the matters to be presented to such meeting. SECTION 3. Notice of Annual or Special Meeting: Written notice of the holding of each Annual or Special Meeting of the shareholders shall be given by the Secretary. Such notice shall state the place, date and hour of the meeting, and the purpose or purposes for which the meeting is called, and shall be signed by the Secretary, and shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. A copy of such notice shall be mailed, postage prepaid, not less than ten nor more than fifty days before the date of the meeting, to each shareholder of record as of such record date, not less than ten nor more than fifty days before the date of the meeting, as may be fixed by the Board of Directors for determining the shareholders entitled to notice of, or to vote at, the meeting. Such notice shall be directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. If, at any meeting, action is proposed to be taken which would, if taken, entitle certain shareholders to receive payment for their shares, the notice of such meeting shall include a statement of that purpose and to that effect. At any meeting of shareholders or any such adjourned meeting, only such business shall be conducted as shall have been properly brought before such meeting or any such adjourned meeting. To be properly brought before any meeting of shareholders or any such adjourned meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before such meeting or any such adjourned meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before such meeting or any such adjourned meeting by a shareholder. For business to be properly brought before any meeting of shareholders or any such adjourned meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five days nor more than sixty days prior to such meeting; provided, however, that in the event less than fifty-five days prior public disclosure of the date of such meeting is made to the shareholders or in the event the only public disclosure of the date of the meeting is written notice in accordance with this Article 1, Section 3, notice by such shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of such meeting was mailed or such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before such meeting (a) a brief description of the business desired to be brought before such meeting and the reasons for conducting such business at such meeting, (b) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (c) the class and number of shares of the securities of the Corporation which are beneficially owned by such shareholder, and (d) any material interest of such shareholder in such business. No business shall be conducted at any meeting of shareholders or any such adjourned meeting except in accordance with the procedures set forth in this Article 1, Section 3. In the event that a shareholder seeks to bring one or more matters before a meeting of shareholders or any such adjourned meeting, the Board of Directors shall establish a committee consisting of non-management directors for the purpose of reviewing compliance with this Article 1, Section 3; provided, however, that if the business to be brought before such meeting or any such adjourned meeting by a shareholder relates to the removal, replacement or election of one or more directors, the Secretary shall appoint two or more inspectors, neither of whom shall be an affiliate of the Corporation, to act in lieu of such committee to review compliance with this Article 1, Section 3. If the committee or the inspectors (as the case may be) shall determine that a shareholder has not complied with this Article 1, Section 3, the committee or the inspectors (as the case may be) shall direct the chairman of such meeting to declare to such meeting or any such adjourned meeting that such business was not properly brought before such meeting or any such adjourned meeting in accordance with the provisions of this Article 1, Section 3; and the chairman shall so declare to such meeting or any such adjourned meeting and any such business not properly brought before such meeting or any such adjourned meeting shall not be transacted. Only individuals who are nominated in accordance with the procedures set forth in this Article 1, Section 3, shall be eligible for election as directors. Nominations of individuals for election to the Board of Directors may be made at a meeting of shareholders or any such adjourned meeting by or at the direction of the board of Directors or by any shareholder of the Corporation entitled to vote for the election of directors at such meeting or any such adjourned meeting who complies with the notice procedures set forth in this Article 1, Section 3. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five days nor more than sixty days prior to such meeting; provided, however, that in the event less than fifty-five days prior public disclosure of the date of such meeting is made to the shareholders or in the event the only public disclosure of the date of the meeting is written notice in accordance with this Article 1, Section 3, notice by such shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of such meeting was mailed or such public disclosure was made. Such shareholder's notice shall set forth (a) as to each individual whom such shareholder proposes to nominate for election or re-election as director, (i) the name, age, business address and residence address of such individual, (ii) the principal occupation or employment of such individual, (iii) the class and number of shares, or the amount of any securities of the Corporation which are beneficially owned by such individual and (iv) any other information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such individual's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the shareholder giving the notice, (i) the name and address, as they appear on the Corporation's books, of such shareholder and (ii) the class and number of shares of the securities of the Corporation which are beneficially owned by such shareholder. At the request of the Board of Directors, any individual nominated by the Board of Directors for election as a director shall furnish to the Secretary that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No individual shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Article 1, Section 3. In the event that a shareholder seeks to nominate one or more directors, the Secretary shall appoint two inspectors, neither of whom shall be an affiliate of the Corporation, to determine whether such shareholder has complied with this Article 1, Section 3. If the inspectors shall determine that such shareholder has not complied with this Article 1, Section 3, the inspector shall direct the chairman of such meeting or any such adjourned meeting to declare to such meeting or any such adjourned meeting that a nomination was not made in accordance with the prescribed procedures, and the chairman shall so declare to such meeting or any such adjourned meeting and the defective nomination shall be disregarded. SECTION 4. Presiding Officer: At all meetings of shareholders the Chairman of the Board shall preside, or in his absence, the Chairman of the Executive Committee, the President or any Vice President may preside. SECTION 5. Inspectors: Prior to each meeting of the shareholders, the Board of Directors may appoint two Inspectors of Election and two or more Alternate Inspectors, to serve at such meeting and any adjournment thereof. If any Inspector refuses to serve, or shall not be present at the meeting of the shareholders, the Alternate Inspectors shall act in the order of their appointment. SECTION 6. Voting and Method of: Except as otherwise provided in the Certificate of Incorporation, at all meetings of the shareholders, each shareholder entitled to vote shall be entitled to one vote for every share standing in his name on the record of shareholders, and all questions to be decided by the shareholders, except the question of election of directors and such other questions the manner of deciding which is specifically regulated by statute, shall be decided by a majority of the votes cast at the meeting in person or by proxy by the holders of shares entitled to vote thereon. All voting shall be viva-voce, except that any qualified voter may require a vote by ballot on any question to be decided. In case of a vote by ballot, each ballot shall state the name of the shareholder voting and the number, class and series (if any) of shares owned by him, and in addition, if such ballot be cast by a proxy, the name of the proxy shall be stated. SECTION 7. Quorum: Except as may be otherwise provided by law or by the Certificate of Incorporation, at all meetings of the shareholders, the holders of a majority of the shares entitled to vote thereat shall constitute a quorum for the transaction of any business. SECTION 8. Fiscal Year: The fiscal year of the Corporation shall close on the 31st day of December in each year. The officers of the Corporation shall prepare and cause to be submitted to the shareholders at the Annual Meeting a detailed statement showing the financial condition of the Corporation. ARTICLE II DIRECTORS SECTION 1. Election of Directors: The directors shall be classified with respect to their terms of office by dividing them into three classes. All classes shall be as nearly equal in number as possible, and no class shall include less than three directors. Subject to such limitations, the size of each class may be fixed by action of the shareholders or of the Board of Directors. At each Annual Meeting of Shareholders, directors to replace those whose terms expire at such Annual Meeting shall be elected to hold office until the expiration of the term of whatever class they are assigned to, provided that no director may be assigned to a class the term of which will expire later than the Annual Meeting next succeeding the director's attaining age 72. Each director shall hold office until the expiration of the term for which he is elected, and until his successor has been elected and qualified, provided, however, that a director may be removed from office as a director, but only for cause, by action of the shareholders or of the Board of Directors. SECTION 2. Number of Directors: The number of the directors of the Corporation shall be not less than 9 nor more than 15 as shall be determined from time to time by the Board of Directors. SECTION 3. Newly Created Directorships and Vacancies: Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason may be filled by the vote of a majority of the directors then in office, although less than a quorum may exist. A director elected to fill a newly created directorship or a vacancy shall be elected to hold office until the next Annual Meeting of the shareholders, and (if he is to have a successor) until his successor has been elected and qualified. SECTION 4. Regular Meetings: Regular Meetings of the Board of Directors shall be held at such times and places as may be fixed by the Board of Directors provided that the Organization Meeting of the newly elected Board of Directors shall be held on the same day as the Annual Meeting of the shareholders, at which time the Executive Committee and other Committees of the Board and Officers shall be elected or appointed. Unless otherwise required by appropriate resolution of the Board of Directors, or by law, notice of any such meetings need not be given. SECTION 5. Special Meetings: Special Meetings of the Board of Directors shall be called by the Secretary upon the order of the Chairman of the Board, the President, or the Chairman of the Executive Committee, or upon the written request of five (5) directors. SECTION 6. Presiding Officer: At all meetings of the Board of Directors, the Chairman of the Board of Directors shall preside, or in his absence, the Chairman of the Executive Committee, the President or any Vice President who is a member thereof may preside. SECTION 7. Quorum: A majority of the directors then in office or half of such number when the number of directors then in office is even, but not less than one-third of the entire Board, shall constitute a quorum for the transaction of business at all meetings of the Board. SECTION 8. Notice: The Secretary shall mail to each director notice of any Special Meeting, or of any Regular Meeting, if required, at least two days before the meeting, or shall telegraph or telephone such notice not later than the day before such meeting. Each director shall file with the Secretary a designation of the address to which such notice to him shall be sent, and any such notice to him thereafter shall be addressed in accordance with his latest designation. SECTION 9. Designation of Executive and Other Committees: The Board of Directors shall by resolution adopted by a majority of the entire Board, designate an Executive Committee of not less than three of its members of whom the Chairman of the Board, the Chairman of the Executive Committee, and the President shall be ex officio members, and said Executive Committee shall have authority to exercise and shall exercise in the interim between the Regular and Special meetings of the Board of Directors all of the rights, powers and duties of the Board of Directors, except such as cannot be lawfully delegated. The Board of Directors may by resolution adopted by a majority of the entire Board, designate one or more directors as alternate members of the Executive Committee, who may replace any absent member or members of the Executive Committee, at any meeting thereof, when required to constitute a quorum. Meetings of the Executive Committee may be called by the Secretary upon order by the Chairman of the Executive Committee or in his absence by the Chairman of the Board, the President, or upon written request of two (2) members of the Executive Committee. At all meetings of the Executive Committee, the Chairman of the Executive Committee shall preside, or in his absence the Chairman of the Board or the President may preside. At all meetings of the Executive Committee, a majority of the full membership of the Executive Committee, including vacancies not filled or eliminated, shall constitute a quorum for the transaction of business. The Board of Directors may by resolution adopted by a majority of the entire Board, designate other Committees, each consisting of three or more directors, and delegate to them such powers and duties of the Board as may be lawfully delegated and determined to be appropriate by the Board. The Executive Committee and each other Committee designated pursuant to this Section, and each member or alternate member thereof, shall serve until the next Annual Meeting of the shareholders and at the pleasure of the Board of Directors. Vacancies in the Executive Committee or any other Committee, occurring for any reason, may by resolution adopted by a majority of the entire Board at any meeting of the Board of Directors, be filled or may be eliminated by reducing the number constituting the membership of such Committee, provided, however, that the membership of any Committee shall not be reduced to less than three. Notice of the time and place of any meeting of the Executive Committee shall be given in the manner provided in Section 8 of this Article for the giving of notice of meetings of the Board of Directors. Meetings of any other Committee designated pursuant to this Section 9 shall be held in such manner, and at such times and places, and upon such notice, if any, as shall be provided in the resolution of the Board creating such Committee. SECTION 10. Compensation: Each director who is not a full-time employee of the Corporation or of any consolidated subsidiary shall be paid such compensation for serving as a director as the Board of Directors may, from time to time, determine. Section 11. Action by Unanimous Written Consent: Any action required to be or permitted to be taken by the Board of Directors or any Committee thereof may be taken without a meeting if all members of the Board of Directors or the Committee consent in writing to the adoption of a resolution authorizing the action. The resolution and written consents thereto by the members of the Board of Directors or Committee shall be filed with the minutes of the proceedings of the Board of Directors or Committee. Section 12. Participation in Meetings by Means of Conference Telephone: Any one or more members of the Board of Directors or any Committee thereof may participate in a meeting of the Board of Directors or Committee by means of a conference telephone or similar communication equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. ARTICLE III OFFICERS SECTION 1. Executive Officers: The Officers of the Corporation shall consist of a Chairman of the Board of Directors, a President, a Vice President-Finance, one or more other Vice Presidents, one or more of whom may also be designated Executive Vice President or Senior Vice President, a Secretary, a Treasurer and a Controller, all of whom shall be elected annually by the Board at a meeting following the Annual Meeting of the shareholders. The Board may also elect one or more Assistant Treasurers and one or more Assistant Secretaries and such subordinate officers and agents of the Corporation as it may from time to time determine. The same person may hold two or more offices, except that the Chairman of the Board and President shall not hold the office of Secretary. SECTION 2. Duties of Chairman of the Board: The Chairman of the Board shall be a director and shall be chief executive officer of the Corporation and, subject to the direction of the Board, shall exercise general supervision over the business and affairs of the Corporation and shall perform such other duties as may be assigned to him from time to time by the Board. If the office of the President is not independently established, he shall perform all duties of that office. He shall preside at all meetings of the Board of Directors and shall also preside at all meetings of the shareholders of the Corporation. SECTION 3. Duties of President: The President shall be a director and shall be the chief operating officer of the Corporation and, subject to the direction of the Board of Directors and the Chairman of the Board, shall direct and supervise the business operations of the Corporation and shall perform such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board may assign to him. The office of the President will normally be vested in the Chairman of the Board, provided, however, that in the discretion of the Board of Directors, the position of President may be established independent of, but reporting to, the Chairman of the Board. SECTION 4. Duties of Vice President-Finance, and other Vice Presidents: The Vice President-Finance shall serve as principal financial officer of the Corporation and shall perform such other duties as shall from time to time be prescribed by the Board of Directors or assigned to him by the Chairman of the Board or by the President. Each other Vice President shall perform such duties as from time to time may be prescribed by the Board of Directors or assigned to him by the Chairman of the Board or the Officer to whom he reports. SECTION 5. Duties of Treasurer and Controller: The Treasurer shall have the care and custody of all the funds and securities of the Corporation and, in general, shall perform all the duties incident to the office of Treasurer including the appointment of depository and disbursement banks. The Controller shall have charge of the books of account of the Corporation and, in general, perform all the duties incident to the office of Controller. The Treasurer and the Controller shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, the President, or the Vice President-Finance may assign. SECTION 6. Duties of Secretary: The Secretary shall keep the minutes of the meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders, and shall attend to the giving and service of all notices for meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders and otherwise whenever required, except to the extent, that such duties shall have been specifically delegated to another officer by the Board of Directors or by the Chairman of the Board. He shall have the custody of such books and papers as the Board of Directors, the Chairman of the Board, or the President may provide. He shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, or the President may assign to him. SECTION 7. Assistant Officers: The Board of Directors may elect one or more Assistant Secretaries or one or more Assistant Treasurers. Each Assistant Secretary, if any, and each Assistant Treasurer, if any, shall have such authority and perform such duties as from time to time the Board of Directors may prescribe or the Chairman of the Board or the President may assign. SECTION 8. Subordinate Officers: The Board of Directors may elect such subordinate officers as it may deem desirable. Each such officer shall have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and prescribe the powers and duties thereof. SECTION 9. Surety Bonds of Officers: The Board of Directors may require from any officer of the Corporation a bond in such amount as it may determine for the faithful discharge of the duties of any such officer; such bond to be approved by the Board and to be obtained at the expense of the Corporation. SECTION 10. Compensation of Officers: The Chairman of the Board, with the advice of the President of the Corporation, shall have power to fix the compensation of all officers of the Corporation, except the Chairman of the Board, the President and the officers reporting directly to either of them. The Board of Directors shall have power to fix the compensation of the Chairman of the Board, the President and of the officers reporting directly to either of them. The Board of Directors may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers. Notwithstanding the foregoing, the Board of Directors may delegate to a Committee of the Board the responsibility of determining the incentive compensation and stock awards of the Chairman of the Board, the President and the officers reporting directly to either of them. SECTION 11. Vacancy: Any vacancy of an office occurring may be filled at any Regular or Special Meeting of the Board of Directors. SECTION 12. Removal of Officers: Any officer of the Corporation may be removed, with or without cause, by the vote of the Board of Directors at any meeting thereof. SECTION 13. Checks and Obligations: All notes and all checks, drafts, or other orders for the payment of money, and all endorsements thereof, executed on behalf of the Corporation shall be signed by any person or persons designated for the purpose either by the Board or by an officer or officers of the Corporation pursuant to authority delegated by the Board of Directors. SECTION 14. Execution of Contracts, Assignments, Deeds and other Documents: All contracts, agreements, assignments, transfers, guaranties, deeds, stock powers or other instruments of the Corporation may be executed and delivered by the Chairman of the Board, the President, or any Vice President or by such other officer or officers, or agent or agents, of the Corporation as shall be thereunto authorized from time to time either by the Board or by power of attorney executed by the Chairman of the Board, the President, any Senior Vice President, or by any person pursuant to authority granted by the Board; and the Secretary or any Assistant Secretary, the Treasurer or any Assistant Treasurer may affix the seal of the Corporation thereto and attest same. SECTION 15. Execution of Proxies: The Chairman of the Board, the President, or any Vice President or any other person designated by the Board of Directors, may authorize from time to time the execution and issuance of proxies to vote upon shares of stock of other corporations owned by the corporation, or authorize the execution of a consent to action taken or to be taken by such other corporation. All such proxies or consents may be signed in the name of the Corporation by any of the persons above- mentioned in this Section 15 or by any other person or persons designated for the purpose either by the Board of Directors or by power of attorney executed by any person pursuant to authority granted by the Board. SECTION 16. Facsimile Signatures: Any signature which is authorized by Section 13, 14 or 15 of this Article may be facsimile, if so determined by the Board of Directors, or by an officer or officers of the Corporation pursuant to authority delegated by the Board of Directors. ARTICLE IV CREATION OF DIVISIONS SECTION 1. Creation of Divisions: The Board of Directors may from time to time create divisions and may set apart to such divisions such aspects or portions of the business, affairs and properties of the Corporation as the Board may from time to time determine. Each division of the Corporation shall be organized and regulated as hereinafter provided in this Article IV. As used in the succeeding Sections of this Article, the term "Company" shall refer to any division of the Corporation. SECTION 2. Executive Officers of Company: The Chairman of the Board of the Corporation may appoint, with the advice of the President of the Corporation, as Executive Officers of the Company, a President, one or more Vice Presidents, appropriate Financial Officers and a Secretary and in his discretion, one or more Assistant Secretaries and Assistant Financial Officers and such subordinate officers as may from time to time be deemed desirable. Such officers shall be appointed as soon as practicable following the creation of the Company and thereafter shall hold office at the discretion of the Chairman of the Board of the Corporation. The same person may hold two or more offices of the Company, except the offices of President and Secretary of the Company, and any person holding an office of the Company may also be elected by the Board as an officer of the Corporation. Vacancies occurring in any office may be filled at any time by the Chairman of the Board of the Corporation, with the advice of the President of the Corporation. The Executive Officers and all other persons who shall serve the Company in the capacities set forth in this Article are hereby appointed agents of the Corporation with the powers and duties herein set forth. However, the authority of said agents shall be limited to matters related to the properties, business and affairs of the Company, and shall not extend to any other portion of the properties, business and affairs of the Corporation nor are such Executive Officers or other persons to be considered officers of the Corporation. SECTION 3. Authority of the Executive Officers of the Company: The President of the Company shall be the Chief Executive Officer of the Company. He shall exercise general supervision over the business, affairs and properties of the Company and shall be directly responsible to, and shall perform such other duties as may be assigned to him from time to time by, the Chairman of the Board or the assigned Officer or other employee of the Corporation to whom the President of the Company reports. All Executive Officers other than the President of the Company, and any subordinate officers, shall be directly responsible to the President of the Company and any Officer or other employee of the Corporation as the Chairman of the Board or the assigned Officer or other employee of the Corporation to whom the President of the Company reports shall direct. SECTION 4. Use of Divisional Names: In executing any document on behalf of any division of the Corporation, the name of such division shall be followed by the words "a division of General Signal Corporation." In any instance in which a division of the Corporation shall use the name of the division followed by the words, "a unit of General Signal," such words shall have the same meaning as "a division of General Signal Corporation." ARTICLE V INDEMNIFICATION SECTION 1. Indemnification: Except to the extent expressly prohibited by the New York Business Corporation Law, the Corporation shall indemnify each person made or threatened to be made a party to any action or proceeding, whether civil or criminal, and whether by or in the right of the Corporation or otherwise, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation, or serves or served at the request of the Corporation any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity while he or she was such a director or officer (hereinafter referred to as "Indemnified Person"), against judgments, fines, penalties, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred in connection with such action or proceeding, or any appeal therein, provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such Indemnified Person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and deliberate dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled. The Corporation shall advance or promptly reimburse upon request any Indemnified Person for all expenses, including attorneys' fees, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if such Indemnified Person is ultimately found not be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such Indemnified Person is entitled. Nothing herein shall limit or affect any right of any Indemnified Person otherwise than hereunder to indemnification or expenses, including attorneys' fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise. Anything in these by-laws to the contrary notwithstanding, no elimination of this by- law, and no amendment of this by-law adversely affecting the right of any Indemnified Person to indemnification or advancement of expenses hereunder shall be effective until the 60th day following notice to such Indemnified Person of such action, and no elimination of or amendment to this by-law shall thereafter deprive any Indemnified Person of his or her rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day. The Corporation shall not, except by elimination or amendment of this by-law in a manner consistent with the preceding paragraph, take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any Indemnified Person to, indemnification in accordance with the provisions of this by-law. The indemnification of any Indemnified Person provided by this by-law shall be deemed to be a contract between the Corporation and each Indemnified Person and shall continue after such Indemnified Person has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnified Person's heirs, executors, administrators and legal representatives. If the Corporation fails timely to make any payment pursuant to the indemnification and advancement or reimbursement of expenses provisions of this Article V and an Indemnified Person commences an action or proceeding to recover such payment, the Corporation in addition shall advance or reimburse such Indemnified Person for the legal fees and other expenses of such action or proceeding. The Corporation is authorized to enter into agreements with any of its directors or officers extending rights to indemnification and advancement of expenses to such Indemnified Person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of such Indemnified Person pursuant to this by-law, it being expressly recognized hereby that all directors or officers of the Corporation, by serving as such after the adoption hereof, are acting in reliance hereon and that the Corporation is estopped to contend otherwise. Persons who are not directors or officers of the Corporation shall be similarly indemnified and entitled to advancement or reimbursement of expenses to the extent authorized at any time by the Board of Directors. In case any provision in this by-law shall be determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford indemnification and advancement of expenses to its directors or officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law whether arising from alleged or actual occurrences, acts or failures to act occurring before or after the adoption of this Article V. For purposes of this by-law, the Corporation shall be deemed to have requested an Indemnified Person to serve an employee benefit plan where the performance by such Indemnified Person of his or her duties to the Corporation also imposes duties on, or otherwise involves services by, such Indemnified Person to the plan or participants or beneficiaries of the plan, and excise taxes assessed on an Indemnified Person with respect to an employee benefit plan pursuant to applicable law shall be considered indemnifiable fines. For purposes of this by-law, the term "Corporation" shall include any legal successor to the Corporation, including any corporation which acquires all or substantially all of the assets of the Corporation in one or more transactions. ARTICLE VI CAPITAL STOCK SECTION 1. Certificates of Capital Stock: All certificates of stock of the Corpora- tion, both preferred and common, shall be separately numbered and the facsimile signature of the Chairman of the Board, or the President, or a Vice President and the facsimile counter-signature of the Treasurer, or an Assistant Treasurer, or the Secretary or an Assistant Secretary and the facsimile seal of the Corporation shall appear thereon, all in manner as authorized under the laws of the State of New York and approved by the New York Stock Exchange. SECTION 2. Transfer Agent and Registrar: All certificates of stock of the Corporation shall be issued only through a Transfer Agent of the Corporation's stock, consisting of a Bank or Trust Company, duly appointed by the Board of Directors to act as Transfer Agent and bear the counter-signature of the Registrar of the Corporation's stock duly appointed by the Board of Directors to act as Registrar. Endorsement to the foregoing effect shall be made upon all certificates issued. SECTION 3. Transfer of Shares: Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or pursuant to a power of attorney duly executed and filed with the Transfer Agent, upon the surrender of the certificate representing the shares to be transferred, properly endorsed. All certificates surrendered for transfer shall be cancelled by the Transfer Agent. SECTION 4. Lost, Destroyed or Stolen Certificates: No certificate for shares of stock of the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation, if the Board of Directors shall so require, of a bond of indemnity upon such terms and secured by such surety as the Board of Directors may in its discretion determine to be satisfactory. SECTION 5. Seal of Corporation: The seal of the Corporation shall be circular in form and bear the words "GENERAL SIGNAL CORPORATION" next inside the line of its circumference and the words "Incorporated June 13th, 1904" in the center within the line of an inner circle. ARTICLE VII AMENDMENTS SECTION 1. Amendments: Except as otherwise provided by the Certificate of Incorpora- tion, any provision or provisions of these By-Laws, including any amendment thereof, regardless of the manner in which any such provision or amendment may have been adopted, may be deleted or amended in any respect at any Annual Meeting of the shareholders, or at any Special Meeting called for that purpose, by a majority of the votes cast at such meeting in person or by proxy by the holders of shares entitled to vote thereon, or with the exception of this Section 1 of Article VII, by a majority of the Board of Directors then in office at any meeting thereof. ARTICLE VIII WAIVER OF NOTICE SECTION 1. Waiver of Notice: Any notice required by these By-Laws may be waived in writing, either before or after the action requiring such notice is taken. EX-3.1 7 CERTIFICATE OF INCORPORATION * 1. Name. The name of the corporation shall be General Signal Corporation. 2. Purposes. A. To manufacture, process, construct, develop, assemble, and produce in any way, to sell, lease, supply, and distribute in any way, to purchase, lease, mine, extract, and acquire in any way, to own, operate, experiment with, deal in, service, finance, and use in any way equipment, apparatus, appliances, devices, structures, materials, processes, information, tangible and intangible property, services and systems of every kind, nature and description: (1) for any application or purpose, including but not limited to, electrical and electronic, hydraulic and pneumatic devices and machinery and controls, or in any way connected with or deriving from any such application or purpose, and, (2) for any other application or purpose, whatsoever, including but not limited to industrial, utility, consumer, defense, governmental, scientific, educational, cultural, financial, recreational, agricultural, transportation, construction, mining, and communication applications or purposes. B. To acquire by purchase, subscription or otherwise, all or part of any interest in the property assets, business, or good will of any corporation, association, firm or individual, and to dispose of, or otherwise deal with, such property, assets, business or good will. C. To engage in any activity which may promote the interests of the Corporation, or enhance the value of its property, to the fullest extent permitted by law, and in furtherance of the foregoing purposes to exercise all powers now or hereafter granted or permitted by law, including the powers specified in the New York Business Corporation Law. 3. Capital. The total number of shares that may be issued by the Corporation is 160,000,000 of which 10,000,000 shares, of the par value of $1.00 per share, shall be preferred ("Preferred Stock") and 150,000,000 shares of the par value of $1.00 per share shall be common ("Common Stock"). The designations, preferences, privileges and voting powers or restrictions or qualifications of the shares of each class shall be as follows: A. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series, with such distinctive serial designations as shall be stated and expressed in the resolution or resolutions providing for the issue of such stock adopted from time to time by the Board of Directors, and in such resolution or resolutions providing for the initial issue of the shares of each particular series, the Board of Directors is expressly authorized to fix the annual rate or rates of dividends for the particular series, to determine whether or not said dividends shall be cumulative, and, if so, from what date; the dividend payment dates for the particular series and the date, if any, from which dividends on all shares of such series issued prior to the record date for the first dividend payment date shall be cumulative; the redemption price or prices for the particular series; the distributive amount or amounts per share on liquidation for the particular series; the voting rights, if any; and the right, if any, of holders of the stock of the particular series to convert the same into stock of any other series or class or other securities of the Corporation or of any other corporation, with any provisions for the subsequent adjustment of such conversion rights. All shares of Preferred Stock of any one series shall be identical with each other in all respects except as to the dates, if any, from which dividends thereon shall be cumulative. As restated April 21, 1994 B. Common Stock. Subject to any limitations prescribed in accordance with Article 3A above, and not otherwise, the holders of the Common Stock shall be entitled to: (i) such dividends (payable in cash, stock or otherwise) as may be declared by the Board of Directors and paid on the Common Stock from time to time out of any funds legally available therefor; (ii) one vote for each share held at all meetings of the stockholders of the Corporation; and (iii) in the event of any liquidation, dissolution or winding-up of the affairs of the Corporation, share in the remaining assets and funds of the Corporation according to their respective shares. C. Preemptive Rights. No holder of shares of Preferred Stock or Common Stock of the Corporation shall as such holder have any preemptive right to purchase shares of any class of stock of the Corporation or shares or other securities convertible into or exchangeable for or carrying rights or options to purchase shares of any class of stock of the Corporation, whether such class of stock, shares or other securities are now or hereafter authorized, which at any time may be proposed to be issued by the Corporation or subjected to rights or options to purchase granted by the Corporation. 4. Office. The office of the Corporation in the State of New York is to be located in the County of Monroe, State of New York. 5. Designation of Secretary of State as Agent. The Secretary of State of the State of New York is designated as the agent of the Corporation upon whom process against it may be served, and the post office address to which the Secretary of State shall mail a copy of any such process served upon him is: c/o CT Corporation System, 1633 Broadway, New York, New York 10019. 6. Registered Agent. The Corporation designates CT Corporation System, a foreign corporation authorized to do business in this State, having an office at 1633 Broadway, New York, New York, 10019, its registered agent in this State upon whom process against this Corporation may be served. 7. Director Liability. No person who is or was a director of the Corporation shall have personal liability to the Corporation or its shareholders for damages for any breach of duty in such capacity, provided that the foregoing shall not eliminate or limit the liability of any director if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the Business Corporation Law of New York. No amendment to or repeal of this Article 7 shall apply to or have any effect on the liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the Business Corporation Law of New York is amended hereafter to expand or limit the liability of a director, then the liability of a director of the Corporation shall be expanded to the extent required or limited to the extent permitted by the Business Corporation Law of New York, as so amended. 8. Stockholder Vote Required. Any of the following actions may be taken by the stockholders of the Corporation only by the affirmative vote of the holders of two-thirds of all outstanding shares entitled to vote thereon: (a) adoption, amendment or repeal of any By-Law, or any provision of this Certificate of Incorporation, relating to (i) the number, classification and terms of office of directors, (ii) the quorum of directors required for the transaction of business, (iii) the filling of newly created directorships and vacancies occurring in the Board of Directors, (iv) the removal of directors, or (v) the power of the Board of Directors to adopt, amend or repeal By-Laws of the Corporation or the vote of the Board of Directors required for any such adoption, amendment or repeal; (b) the removal of directors; or (c) any amendment or repeal of this Article 8. Nothing contained in this Article 8 shall in any way limit the power of the Board of Directors to adopt, amend or repeal By-Laws of the Corporation. 9. Duration. Its duration is to be perpetual. EX-10.12 8 September 23, 1994 Mr. Michael D. Lockhart 8280 Kugler Mill Road Cincinnati, OHIO 45243 Dear Mike: On the basis of our discussions and your interviews with members of our Board of Directors, I am pleased to extend this written confirmation of our verbal offer to become President and Chief Operating Office of General Signal Corporation, reporting to me as Chairman and Chief Executive Officer. You and I will agree on the effective date of your appointment. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be at an annual rate of $600,000 paid biweekly. 2. General Signal will pay you $300,000 in March, 1995, to compensate you for the anticipated payment you would have received from General Electric for 1994 performance (less any amount paid by General Electric). In subsequent years, you will be eligible for a Target Award of 60% of base salary (and a cap of 175% of target) with actual awards depending on corporate performance and as administered by the Personnel and Compensation Committee of the Board of Directors; a minimum guarantee of $300,000 will be in place for 1995 performance, payable in March of 1996. 3. On January 2, 1995 you will receive an award of 125,000 shares of restricted common stock under our 1992 Stock Incentive Plan, subject to certain conditions concerning performance measurement, and a vesting schedule as follows: 9/1/95 - 26,000 shares 9/1/96 - 18,000 shares 9/1/99 - 13,000 shares 3/25/14 - 68,000 shares 125,000 shares From the date of grant, you will receive dividends during the vesting period, paid quarterly. Please refer to Section 9 of this letter for modification to the normal provision for forfeiture of unvested stock upon termination of employment. 4. You will also be recommended for an award of 180,000 shares of non-qualified stock options under the 1992 Stock Incentive Plan. This award is subject to the usual terms and conditions of awards under the Plan, including an initial period of one year of employment, and shares may be exercised in 20% cumulative installments, assuming continue employment (again, subject to Section 9 of this letter). The option price will be set at 100% of fair market value on the date of grant, which is anticipated to be the next regularly scheduled Board meeting. In addition, you will be eligible to receive further awards under the Plan in future years as administered by our Personnel and Compensation Committee. In that respect, we will treat you fairly, commensurate with the then-existing General Signal plan. 5. For purposes of your retirement benefits, the Company will recognize 1.5 years of credited service for each year of your employment with the Company. These special additional benefits must necessarily be provided outside the Corporate Retirement Plan of General Signal and will be paid from the general funds of the Company. Your pension from General Electric will be an offset to the special benefit. 6. We will put in place an unfunded deferred compensation amount of $711,900 on January 2, 1995, designed to yield $2,100,000 at age 62 (year 2011) calculated at a 7% rate. After year seven, 10% of the principal will vest each year. A full payment of the principal and interest will be available at age 62 which will be taxable with no gross up. You have agreed to use the net after-tax proceeds from your General Electric deferred compensation plan distribution to buy General Signal shares which you will hold for a minimum of five years. 7. I will recommend you for membership on the Board of Directors promptly following your acceptance of employment. 8. Your medical and life insurance coverage with General Signal will commence after 90 days of employment. You should continue your current coverage with General Electric under COBRA, and we will reimburse you for the expense involved. Beginning in 1995 you will be entitled to four weeks of annual vacation. 9. In the unlikely event that your employment is involuntarily terminated by the Company during the first three years of your employment, other than for cause, we will provide you with termination benefits for the period remaining between the date of your termination and three years from the original date of your employment. Termination benefits will be your monthly salary, an assumed $300,000 annual bonus (prorate monthly), continued vesting of Company service for purposes of pension credited service and for outstanding awards under any then existing option or restricted stock grants, and continuing life and medical insurance benefits. Naturally, these termination benefits will not be duplicative of any other plan or program. After you have achieved three years of employment, you will be covered under the normal General Signal Severance Plan. 10. In response to your request, I have attached a copy of our Change in Control Severance Play Plan and Transfer and Moving Allowance policies. With respect to the relocation policy, we have indicated the Transfer Allowance we will provide under that section on page 2 of the policy will be a $100,000 allowance which will not be grossed up. I am also enclosing a copy of our normal form of stock option agreement and restricted stock agreement, as well as copy of an indemnity contract which you will be given. 11. Mike, you should know that General Signal, in common with most other companies, does not offer or ask for employment commitments for a set period of time. In addition, this offer is conditioned upon satisfactorily completing a physical examination (which includes drug testing) and fulfilling the requirements of the Immigration Reform and Control Act of 1986. Assuming the foregoing is acceptable to you, please sign and return a copy of this letter to me no later than Friday, September 30, 1994. Sincerely, ACCEPTED: __________________________ Michael D. Lockhart __________________________ Date: EX-10.13 9 January 26, 1995 Mr. Terence D. Martin 146 Central Park West #12G New York, NY 10023 Dear Terry: On the basis of our discussions and your interviews with members of our Board of Directors, I am pleased to extend this written confirmation of our verbal offer to become Executive Vice President and Chief Financial Officer of General Signal Corporation reporting to me as Chairman and Chief Executive Officer. Your appointment will be effective February 2, 1995. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be at an annual rate of $410,000. 2. You will be a participant in General Signal's Incentive Compensation Plan. As such, you will be eligible for a Target Award of 60% of base salary (and a cap of 200% of target) with actual awards depending on corporate performance and as administered by the Personnel and Compensation Committee of the Board of Directors; a minimum guarantee of $246,000 will be in place for 1995 performance, payable in March of 1996. 3. You will be recommended for an award of 10,000 shares of restricted common stock under our 1992 Stock Incentive Plan with a vesting schedule as follows: 2/1/98 - 3,333 shares 2/1/99 - 3,333 shares 2/1/00 - 3,334 shares 10,000 shares From the date of grant, you will receive dividends paid quarterly and have voting rights for the shares during the vesting period. 4. You will also be recommended for an award of 30,000 shares of non-qualified stock options under the 1992 Stock Incentive Plan. This award is subject to the usual terms and conditions of awards under the Plan, including an initial period of one year of employment, and shares may be exercised in 25% cumulative installments assuming continued employment. The option price will be set at 100% of fair market value on the date of grant which is anticipated to be the Board meeting of February 2, 1995. In addition, you will be eligible to receive further awards under the Plan in future years as administered by our Personnel and Compensation Committee. In that respect, we will treat you fairly commensurate with the then-existing General Signal Plan. 5. For purposes of your retirement benefit, the Company will recognize 2 years of credited service for each year of your employment with the Company. These special additional benefits must necessarily be provided outside the Corporate Retirement Plan of General Signal and will be paid from the general funds of the Company. In addition, the credited service applied for pension purposes will be used to determine your eligibility for employee paid post-retirement medical benefits under our "Rule of 75" which requires the sum of age and service to equal at least 75 in order to participate. 6. Your medical and life insurance (twice base salary - company paid) coverage with General Signal will commence after 90 days of employment. You should continue medical coverage with your current employer under COBRA, and we will reimburse you for the expense involved. 7. Under General Signal Corporation's Change in Control Severance Pay Plan as an Executive Officer you would be entitled to three years compensation and continuation of other employee benefit plans applicable to active salaried employees. 8. Terry, you should know that General Signal, in common with most other companies, does not offer or ask for employment commitments for a set period of time. In addition, this offer is conditioned upon satisfactorily completing a physical examination (which includes drug testing) and fulfilling the requirements of the Immigration Reform and Control Act of 1986. Assuming the foregoing is acceptable to you, please sign and return a copy of this letter to me no later than Tuesday, January 31, 1995. Sincerely, EMC:cm Enclosure Accepted by: Terence D. Martin Date EX-10.14 10 January 31, 1995 Mr. Peter A. Laing 977 Sunset Road Stamford, CT 06903 Dear Peter, This will confirm the terms of the severance agreement which has been reached as a result of our discussions. 1. Effective January 9, 1995 you will relinquish your role as Senior Vice President - Operations of General Signal. 2. You will continue on as an employee of General Signal through March 31, 1997 with the period until February 1, 1995 being used as a transition time during which discussions can be held at a mutually convenient time and place to assure a smooth transfer of responsibilities. As an employee of General Signal, you will be compensated at an annual rate of $310,000 until February 1, 1995. From February 1, 1995 through December 31, 1996 you will be compensated at an annual rate of $202,174 and for the period January 1, 1997 through March 31, 1997 you will again be compensated at an annual rate of $310,000. As part of this compensation arrangement you agree to provide consulting services during the period February 1, 1995 to April 1, 1997 if requested and authorized by the CEO. Such consulting services will be reasonably related to your previous functional responsibilities and will only be requested in situations where the Corporation would benefit from the special knowledge you have gained from your previous work experience. Moreover such services will be reasonable in both time and duration and will be scheduled at a time convenient to you. In addition, for the period April 1, 1997 through December 31, 1997 you will be compensated $50,000 by the Corporation as a non-employee independent contractor for consulting services. You will not be required to perform consulting services in excess of 100 hours during this period. Any consulting services required beyond the 100 hours will be compensated for at the rate of $500.00 per hour. You will be reimbursed for business expenses associated with any employment or consulting assignment. 3. You will be eligible for full consideration for 1994 incentive compensation, payable in March 1995, based on corporate performance. You will not be eligible for any incentive compensation based on 1995 performance. 4. You have indicated that you will elect early retirement under the General Signal Retirement Plan (supplemented by the Benefits Equalization Plan to the extent necessary) effective April 1, 1997. It is understood that, provided you meet the life expectancy requirement, you will be able to receive your pension benefits in a lump sum distribution. The amount will be reduced by no more than 3% per year for the 8 1/2 years that your retirement date will predate normal retirement of age 65. 5. As an employee, you will continue to be covered under the terms of the Corporate Office benefit programs. After retirement, you and your dependents will be covered by the applicable post retirement benefits provided retirees of General Signal. 6. Your automobile (1994 Mercedes 420) will become your property effective March 1, 1995. You will have an income tax liability for the value of the car. 7. You will keep confidential all confidential and trade secret information concerning General Signal, its business, and its prospects which has become known to you. 8. All salary payments provided hereunder will cease in the event of your death, your voluntary termination of your employment or the termination of your employment status by General Signal for cause. It is understood that your acceptance of full time employment with another employer shall not constitute voluntary termination of your employment with General Signal. 9. The Company will provide the services of a certified financial planner at a cost not to exceed $3,000. 10. You may retain the laptop computer and cellular phone in your possession. I will let you know if this will generate any tax liability. Please countersign and return to me the enclosed copy of this letter indicating your acceptance of the understanding it sets forth. Sincerely, GF:cm Enclosure ______________________________ Peter A. Laing Date EX-10.15 11 Schedule I February 1, 1995 Mr. Stephen W. Nagy 8 Joshua Slocum Dock Stamford, CT 06902 Dear Steve, This will confirm the terms of the severance agreement which has been reached as a result of our discussions. 1. Effective January 13, 1995 you will relinquish your role as Senior Vice President - Finance & Chief Financial Officer of General Signal. 2. You will continue on as an employee of General Signal through July 31, 1996. As an employee of General Signal, you will be compensated at an annual rate of $310,000. In addition, if you are unemployed as of August 1, 1996 you will be eligible for up to an additional six months salary as long as you remain unemployed. Employment is defined to include consulting and self-employment. 3. You will be eligible for 1994 incentive compensation, payable in March 1995, based on corporate performance and according to formula. You will not be eligible for any incentive compensation beyond that payable in March, 1995. 4. You have indicated that you will elect early retirement under the General Signal Retirement Plan (supplemented by the Benefits Equalization Plan to the extent necessary) effective August 1, 1996 or the first day of the month following your no longer being an employee which ever is later. 5. As an employee, you will continue to be covered under the terms of the corporate office benefit programs. After retirement, you and your dependents will be covered by the applicable post retirement benefits provided retirees of General Signal. 6. Your automobile (1993 Infiniti) will become your property effective March 1, 1995. You will have an income tax liability for the value of the car. 7. You will keep confidential all confidential and trade secret information concerning General Signal, its business, and its prospects which has become known to you. 8. All salary payments provided hereunder will cease in the event of your death. 9. Outplacement or reasonable offsite office arrangements during your payroll continuation will be provided if you desire such services. 10. As part of this agreement you will be required to sign a Release of All Claims and Demands. Please countersign and return to me the enclosed copy of this letter indicating your acceptance of the understanding it sets forth. Sincerely, GF:cm Enclosure ___________________________ Stephen W. Nagy Date EX-27 12
5 0000040834 GENERAL SIGNAL CORP. 1,000,000 YEAR DEC-31-1994 DEC-31-1994 0 1 272 14 213 717 612 331 1343 357 270 77 0 0 471 1343 1528 1528 1110 1356 0 0 12 160 56 104 (23) 0 0 81 1.71 1.71
EX-13 13 GENERAL SIGNAL 1994 ANNUAL REPORT Financial Highlights
Year Ended December 31, (Dollars in millions, except per-share data) 1994 1993 ---- ---- Net sales $1,527.7 $1,354.2 Earnings from continuing operations(1) $104.1 $86.4 Earnings per share from continuing operations(1) $2.20 $1.91 Return on average shareholders' equity from continuing operations(1) 19.4% 16.9% Cash dividends paid per common share $.90 $.90
[GRAPHICS OMITTED] Table of Contents 1 Chairman's Letter 3 Bolt-On Acquisition Strategy 4 General Signal At a Glance 6 Process Controls Highlights 9 Electrical Controls Highlights 12 Industrial Technology Highlights 14 Management's Discussion and Analysis 18 Report of Management and Auditors 19 Statement of Earnings 20 Balance Sheet 21 Statement of Shareholders' Equity 22 Statement of Cash Flows 23 Notes to the Financial Statements 34 Eleven-Year Financial Summary 36 Directors and Officers 37 Shareholder Information 1 To Our Shareholders General Signal marked its 90th birthday in 1994. It was, however, more than just an historic milestone. The past year was one of our most momentous, and for many of the management team, the busiest year ever. Most of the Class 1 financial goals we set a number of years ago were either met or exceeded an achievement of which we are proud. We increased the annual dividend payout rate from 90 to 96 cents per share the first increase in years and we set an even higher payout target of 40 to 45 percent of trailing earnings. With confidence in our future growth and financial condition, we expect more consistent increases are ahead. We welcomed Michael Lockhart to the new position of president and chief operating officer. Mike's extensive experience and terrific business sense will be important assets in achieving General Signal's goals for growth. And in a second great appointment, we recently welcomed aboard Terry Martin as our new executive vice president and chief financial officer. Terry's broad background and capabilities will do much to advance our financial and cash management programs necessary tools to meet our growth targets. You should expect better results, sooner, with Mike and Terry as key parts of our team. Four new "bolt-on" acquisitions completed during the year strengthened the competitive positions of our pump and electrical fittings businesses, and gave them access to important new markets and distribution channels. At the same time, we increased the critical mass of core Electrical and Process Controls businesses through the consolidation of several units. And we also announced the planned divestiture of the Leeds & Northrup and Dynapower/Stratopower units and took a charge, primarily for taxes, for moving them to discontinued operations. Both are good businesses, but we were not well positioned to make them market leaders. Our failed bid for Reliance Electric, while disappointing, gave us insight, experience and $55 million in termination fees, which were used to enhance future earnings. In the failed merger process, we learned how to improve several existing businesses and some new tricks for acquiring companies. But, most of all, we demonstrated that we will "not chase a deal" to the detriment of our current and future shareholders. Improvements Reflect Success of Repositioning Effort Sales on a continuing business basis for 1994 advanced 13 percent to $1.53 billion from $1.35 billion last year. Operating earnings on a continuing basis gained 21 percent to $169.7 million. Earnings on the same basis were $104.1 million, up 20.5 percent from last year, and earnings per share rose to $2.20, a new record for the company. Focus Unchanged for Balance of Decade We will continue to fine-tune our financial goals for the company while setting new growth strategies as we enter the decade's second half. [GRAPHICS OMITTED] 2 While we will continue to strengthen the focus on top-line growth through both internal development and bolt-on acquisitions, we will not relinquish our commitment to achieving the financial return targets that have been a cornerstone of our repositioning effort. We are pleased with our accomplishments during the decade's first half. General Signal's repositioning over the past six years has yielded the following: We have exited the businesses of defense, railroad equipment, and semiconductor. When Leeds & Northrup is sold, we will also have exited the instrumentation, measurement and systems businesses. The number of business units has been reduced to 11 from 44 units. This has been accomplished through 24 bolt- on acquisitions, 20 unit divestitures, and 15 unit consolidations. The average business unit size has increased to $145 million from $37 million. Sales per employee have risen to $133,000 from $95,000. The number of manufacturing facilities has been reduced from 117 to 68 facilities. SG&A as a percent of sales has improved from 24 percent to 18.1 percent at year-end 1994. Working capital as a percent of sales has improved from 29.7 percent to 13.5 percent. On a continuing basis, the return on equity has risen to 19.4 percent from less than 10 percent. Taken together, these measurements place us in Class 1 territory a position we will maintain. Bolt-On Acquisitions Strengthen Competitive Position The addition of Fairbanks Morse expanded our pump product line and market reach, making General Signal a leading provider of pump equipment to the U.S. municipal market. The acquisitions of Benjamin Signals, Neer Manufacturing, and the assets of Berger Industries' steel fittings business rounded out our signaling and fittings product lines, enhancing these units' positions as leading suppliers to the electrical industry. Our bolt-on acquisition effort, as outlined following this letter, has successfully generated growth and has allowed us to direct investment to core businesses with the best long-term growth potential. In short, growth through bolt-on acquisitions is now a core competency for General Signal. We will continue to prospect for additions to the company that enhance our global competitive position and shareholder returns. Although our bid for Reliance Electric was ultimately unsuccessful, the exercise helped focus our strategic interests even further. Also, the break-up fee has given us an opportunity to accelerate operating improvements, an effort that will have a direct impact on our long-term growth. Our consolidations of Kinney Vacuum with General Signal Pump Group, O-Z/Gedney with Sola to form GS Electrical Power Systems Group, and the consolidation of Telenex with Tau-tron to form GS Telecom Group, continue to increase the critical mass of our ongoing businesses. 1994 was a new high-water mark for General Signal in many respects. It also established a base for continuing performance improvements. Our core competencies disciplined growth, asset management, productivity improvement and acquisition integration will serve us well as we work to generate superior and consistent returns for our shareholders. The hard work and commitment of our employees and support of our shareholders is deeply appreciated. On a more personal note, I would like to acknowledge the many outstanding contributions to the development and success of General Signal made by Nathan R. Owen, who will not be standing for re-election to General Signal's board of directors. His support and advice were important to me and to the company. Mr. Owen served as chairman of the board and chief executive officer from 1962 to 1984 and as chairman of the executive committee of the board since 1980. General Signal will always be grateful for his guiding wisdom. For his extraordinary service, the Board will appoint Mr. Owen a Director Emeritus. Edmund M. Carpenter Chairman and Chief Executive Officer 3 Bolt-On Acquisition Strategy One of General Signal's strongest core competencies, making and integrating "bolt-on" acquisitions, has enabled the company to grow faster than its fundamental markets. General Signal has completed 24 bolt-on acquisitions during the past six years. A bolt-on acquisition is a direct extension of an existing business designed to enhance its strategic position and to create shareholder value. Bolt-on acquisitions are typically: Product extensions that are closely aligned with an existing business, its distribution network, and its customers; Customer diversifications, in which the acquisition adds similar products that have a different customer base or distribution system; and/or Geographic expansions that extend the company's presence in foreign, domestic, or regional markets. Because bolt-ons reinforce businesses already well understood by General Signal management, these acquisitions provide a far more favorable return on the company's investment at much lower risk than "stand-alone" or unrelated acquisitions. General Signal identifies companies that offer a good strategic fit with its core businesses and then develops a detailed plan for integrating these companies with existing operations. The goal of integration is to realize the benefits of scale, improved distribution, and other synergies that will enhance the acquired company's ability to compete and grow. All bolt-on acquisitions involve some level of integration to achieve cost efficiencies from general and administrative functions, manufacturing operations, and marketing and sales activities. Integrating bolt-on acquisitions quickly and successfully helps to ensure that General Signal realizes the returns and competitive advantages which are the goals of the acquisition effort. Bolt-on acquisitions have added almost $400 million in revenue to General Signal's continuing operations since 1988 and have significantly improved the units' competitive positions and critical mass. Bolt-On Acquisitions 1988 to 1994
Acquisition - Acquiring Unit Products Acquisition Date - ----------------------------- ------------ ----------------- Turbo-Mueller - Lightnin Mixing equipment November, 1988 Jesse (Turbo-Mueller) - Lightnin Mixing equipment January, 1989 Hydromatic Pumps - General Signal Pump Group Submersible pumps, grinder pumps, and January, 1989 sewage ejector pumps Mirtone - GS Building Systems Corporation Intercom and fire alarm systems March, 1989 ARC Teleproducts - GS Telecom Group Data communications end-user test and control equipment July, 1989 Dual-Lite - GS Building Systems Corporation Exit signs January, 1990 MPH - Revco/Lindberg Fuel-fired and electric furnaces May, 1990 Borri - GS Electrical Power Systems Group Uninterruptible power systems July, 1990 RTT - GS Telecom Group Monitor/analyzer for telephone company January, 1992 networks ABB-UPS - GS Electrical Power Systems Group Uninterruptible power systems January, 1992 Associated Lighting - GS Electrical Power Systems Group Hazardous lighting March, 1992 FAST - GS Building Systems Corporation Fire alarm control systems May, 1992 Valex - Lightnin Magnetic drive mixers July, 1992 GMV - Lightnin Fixed and portable-mount mixers July, 1992 Unival - DeZurik Ported gate valves August, 1992 Ryken Tube Manufacturing - Metal Forge Tubular auto parts October, 1992 Northwest Alabama Industries - GS Electrical Power Electric tubing/fittings for light November, 1992 Systems Group commercial applications Revco Scientific - Revco/Lindberg Ultra low-temperature freezers, October, 1993 refrigerators, and CO2 incubators for life sciences research Layne & Bowler - General Signal Pump Group Vertical pumps for water supply, November, 1993 treatment, and irrigation Jannette Drives - Leeds & Northrup Large drive units for electric utilities November, 1993 Benjamin Signals - GS Building Systems Corporation Audible and visual signals for industrial and hazardous locations March, 1994 Assets of Berger Industries' steel fittings Steel fittings for nonresidential March, 1994 division - GS Electrical Power Systems Group construction Neer Manufacturing - GS Electrical Power Systems Group Zinc die-cast fittings April, 1994 Fairbanks Morse - General Signal Pump Group Pumps for wastewater treatment, irrigation, home water December, 1994 systems, fire protection, and general industrial use
4 and 5 General Signal At a Glance [GRAPHICS OMITTED] PRINCIPAL BUSINESSES Process Controls General Signal Pump Group North Aurora, Illinois PRODUCTS Centrifugal, submersible, regenerative turbine, and vertical turbine pumps; mechanical vacuum pumps and pump packages MARKETS SERVED Municipal and residential water and wastewater treatment, commercial heating, ventilation and air conditioning; agriculture; food processing and packaging; chemical and pharmaceutical processing; electrical manufacturing and service; specialty metals processing; and heat treating and other manufacturing industries MAJOR COMPETITORS ITT (Bell & Gossett, Flygt, Allis-Chalmers), Syncroflow, Weil, Taco, F.E. Meyer, Peerless, Stokes, Leybold, Edwards, Busch, Nash ECONOMIC VARIABLES Residential and nonresidential construction; industrial capital spending PRINCIPAL BUSINESSES Lightnin Rochester, New York PRODUCTS Industrial fluid mixers, agitators, and coal feeder equipment MARKETS SERVED Process industries, including chemical, petroleum, minerals processing; food and beverage, and pharmaceutical manufacturing; industrial and municipal water treatment and supply; electric utilities MAJOR COMPETITORS Chemineer, Philadelphia Mixers, EMI ECONOMIC VARIABLES Electric utility spending and industrial capital spending PRINCIPAL BUSINESSES DeZurik Sartell, Minnesota PRODUCTS Industrial valves that isolate and throttle gases, liquids, slurries and dry solids; consistency transmitters MARKETS SERVED Process industries, including chemical, petroleum, and minerals processing; pulp and paper manufacturing; air conditioning, industrial and municipal water and waste- water treatment; electric utilities MAJOR COMPETITORS Keystone, Pratt, Fisher, Neles-Jamesbury ECONOMIC VARIABLES Industrial capital spending and government funding for water treatment and sewage treatment PRINCIPAL BUSINESSES Revco/Lindberg Asheville, North Carolina PRODUCTS Ultra-low temperature laboratory freezers, specialty refrigerators, and CO2 incubators; industrial and laboratory ovens and furnaces MARKETS SERVED Life science and industrial laboratory research; primary and fabricated metals processing; electronic equipment processing MAJOR COMPETITORS Forma Scientific (Life Sciences Int'l, PLC), Sanyo, Barnstead/Thermolyne (Sybron Int'l Corp.), Despatch, Grieve, Gruenberg Oven Co., Surface Combustion ECONOMIC VARIABLES Government and industrial funding of research, fabricated metals, automotive, consumer electronics and industrial capital spending ELECTRICAL CONTROLS PRINCIPAL BUSINESSES GS Electrical Power Systems Group Farmington, Connecticut PRODUCTS Uninterruptible power systems, DC power supplies, power conditioners/regulators, low-voltage general purpose transformers, and transformer remanufacturing/decommissioning services; electrical conduit and cable fittings, enclosures and controls, industrial lighting, heat-trace systems, and firestop products MARKETS SERVED Computer and electronic equipment manufacturers and users, electric utilities; factory automation; nonresidential and nonbuilding construction; large processing industrials MAJOR COMPETITORS Emerson, Exide, American Power Conversion, Square D, ITT, Zytec, AT&T, GE, ABB, Thomas & Betts, Harvey Hubbell, Crouse Hinds, Appleton, Raychem, Thermon, Dow, 3M ECONOMIC VARIABLES Nonresidential construction; industrial and retail capital spending PRINCIPAL BUSINESSES GS Building Systems Corporation Farmington, Connecticut PRODUCTS Fire detection systems, low-voltage systems service, emergency lighting, exit signs, signaling devices, and flexible wiring systems MARKETS SERVED Commercial, industrial, and institutional construction MAJOR COMPETITORS Simplex, Cerberus, Pittway, Federal Signal, Lithonia, Kaufel Group ECONOMIC VARIABLES Construction and life safety building codes PRINCIPAL BUSINESSES GS Electric Carlisle, Pennsylvania PRODUCTS Universal, blower, and permanent magnet fractional horsepower electric motors MARKETS SERVED Consumer appliance manufacturing and commercial applications MAJOR COMPETITORS Ametek (Lamb Electric), Northland, United Technologies, Mamco ECONOMIC VARIABLES Consumer spending PRINCIPAL BUSINESSES Dielectric Communications Raymond, Maine PRODUCTS Radio frequency transmission and pressurization equipment and systems MARKETS SERVED Broadcasting, telecommunications, government MAJOR COMPETITORS Andrew, Harris, Pure Gas ECONOMIC VARIABLES Spending by TV and FM/AM radio stations, Bell Operating Companies and independents INDUSTRIAL TECHNOLOGY PRINCIPAL BUSINESSES Metal Forge Dublin, Ohio PRODUCTS Cold-forged solid and tubular metal components and assemblies for automobiles and bicycles MARKETS SERVED Automotive and bicycle manufacturers and tier-one suppliers to these manufacturers MAJOR COMPETITORS Divisions of automotive OEMs; TRW Inc. (Thompson Products Division), Japanese-owned transplanted suppliers; off-shore bicycle forging suppliers, Walker, Arvin ECONOMIC VARIABLES Domestic auto, car, and bicycle production PRINCIPAL BUSINESSES GFI Genfare Elk Grove Village, Illinois PRODUCTS Electronic fareboxes, turnstiles, and vending equipment MARKETS SERVED Mass transit systems and federal government agencies MAJOR COMPETITORS Cubic, CGA, Autelca ECONOMIC VARIABLES Funding for mass transit PRINCIPAL BUSINESSES GS Telecom Group Mount Laurel, New Jersey PRODUCTS Performance monitoring and test equipment for telecommunications networks; data communications network management systems, and diagnostic equipment MARKETS SERVED Telecommunications service providers and network operators worldwide; data centers at industrial corporations, banking and financial service organizations, and other data communi- cations network operators and users MAJOR COMPETITORS Hewlett-Packard, Dynatech TTC, Hekimian, Anritsu, Wiltron, NSC, Data Switch, Tekelec, ADC ECONOMIC VARIABLES Capital spending in the banking and financial services sector; interexchange long-haul carriers and telecom authorities overseas; capital spending on computer systems and spending by Bell Operating Companies and independents 6 PROCESS CONTROLS [GRAPHICS OMITTED] 7 General Signal's Process Controls sector delivered strong earnings growth in 1994, reflecting the sector's enhanced competitive position in the United States and abroad, "bolt-on" acquisitions particularly in the pump business and a continued effort to improve productivity and reduce operating costs. The recent consolidation of Kinney Vacuum with General Signal Pump Group and the planned divestiture of Leeds & Northrup reflect General Signal's continued focus on building critical mass and enhancing the competitive position of its core businesses. Leeds & Northrup has undergone a successful repositioning effort, introducing an array of new products while significantly reducing costs. However, changes within the instrumentation and measurement section of the process controls industry led General Signal to conclude that Leeds & Northrup would be better suited to an owner who already has significant critical mass in this area or whose strategic focus is to build such a presence. With the recent bolt-on acquisition of Fairbanks Morse Pump Corporation, General Signal Pump Group (formerly Aurora Pump) became a leading supplier to the domestic municipal market. Fairbanks' strength in wastewater treatment, fire protection, and industrial and home water systems gives General Signal the industry's most comprehensive line of pumps and expands its distribution network. The 1993 addition of Layne & Bowler to General Signal Pump Group increased the company's share of the domestic municipal market and aided the unit's expansion into international markets. New business included the sale of the unit's first vertical turbine pumps to a New Jersey municipality. The unit also received contracts for dry-pit, non-clog pumps to pump wastewater in treatment plants in Southern California and Pennsylvania. General Signal Pump Group plans to introduce the industry's first energy-efficient dry-pit, non-clog pump to the municipal market in 1995. The unit significantly increased its share of the fire protection market in 1994 as a result of higher regional market sales for diesel engine- driven products, a new distributor promotional pricing program, and increased packaged sales of Layne & Bowler vertical pumps and Aurora horizontal pumps. Shorter lead times also helped boost orders for the unit. Capitalizing on new guidelines set by the National Fire Protection Association, the unit introduced its first vertical in-line fire pump to the domestic market. The product expands the unit's commercial market reach to include small buildings. International pump sales also improved as a result of a concentrated effort to market the company's line of pumps designed to be powered by 50 Hertz motors. General Signal Pump Group plans to take advantage of robust growth in the overseas commercial market by introducing a new line of multi-stage diagonal split-case pumps in 1995. These pumps provide high-pressure pumping for boiler feed and high-rise building water supply projects. Domestic and international vacuum pump sales increased as well in 1994, aided by the 1993 introduction of the unit's liquid ring vacuum pump, and strong sales to domestic and foreign manufacturers in the food packaging markets. The unit also became a supplier of rotary piston pumps to one of the world leaders in vacuum packaging equipment during 1994. General Signal Pump Group's line of mid-sized liquid ring vacuum pumps contributed to strong revenue growth in the chemical market. The product line should continue to offer steady sales gains both in the U.S. and abroad as the unit introduces the line to its foreign distribution network. Overall, international pump sales increased significantly in 1994 and are expected to continue to grow strongly in 1995. Lightnin continued to lead the world mixer market, providing cost-effective and technologically advanced solutions to the chemical, mineral, pulp and paper, and municipal water and wastewater markets. Demand for mixers used in chemical applications, particularly in the production of terephthalic acid, continued to be strong, as Lightnin offers the industry's most efficient large mixers for this application. Lightnin successfully pursued new applications for its bottom-entry seal-less mixer line, winning its largest single contract from a major soft-drink manufacturer. Used in conjunction with top-entry mixers, these bottom-entry units allow mixing to continue at low liquid levels, resulting in higher yields for the manufacturer. The unit also expanded its presence in Asia, where infrastructure spending increased demand [GRAPHICS OMITTED] 8 for low-cost, efficient water and wastewater treatment mixers. A new light assembly and shipping facility in Shanghai, China will allow Lightnin to respond more quickly to its Chinese customers. This facility will also provide an export platform to other Asian markets. In addition, Lightnin plans to introduce a new parallel shaft gear drive in 1995. The new product responds to growing demand for large, inexpensive mixers for water treatment and minerals processing applications in Asia and other developing regions, where the drive's compact design makes it less expensive to produce. Lightnin's Stock Equipment division received a large order for coal feeders to supply 3600 megawatts of power to China as a result of its recent joint venture with Shenyang Power Equipment Company. As this order indicates, China is adding as much power every year as the United States will add throughout the 1990s. Stock expects order levels to continue at a high rate over the next several years. Sales for DeZurik's valve business declined slightly as a result of continued weakness in the paper industry. However, this decline was nearly offset by increased sales in the municipal and wastewater treatment markets. Sales for valves larger than 36 inches in diameter increased, a trend that is expected to continue as large municipalities expand and retrofit their waste treatment plants. The unit also broadened its range of products for the pulp and paper market to position itself for the market's anticipated recovery. The fourth quarter was the strongest for the pulp and paper industry in several years. DeZurik's orders were up in this period, indicating that this recovery has begun. A new sales office in Austria broadened DeZurik's European operations to central Europe and helped secure a multi-million dollar contract for a Middle Eastern desalinization project. Further, to ensure long-term growth and profitability, the unit is focusing its product development efforts on new seating and materials technology, actuators, and consistency transmitters. These efforts, in conjunction with cost reduction programs now underway, are expected to provide significant growth in sales and profits in 1995. Revco/Lindberg delivered strong earnings in 1994 as the unit consolidated its manufacturing and administrative operations, focused on growth opportunities in the laboratory and industrial markets, and channeled products to the unit's expanded distribution network. These efforts, combined with an aggressive cost-reduction program, resulted in a significant increase in earnings. The unit maintained its position as a leading supplier of ultra-low temperature freezers and specialty refrigerators. A new line of chlorofluorocarbon-free laboratory refrigerators, redesigned in anticipation of 1996 government regulations banning chlorofluorocarbons, was well received. An expanded line of laboratory ovens introduced under the Lindberg_ and Blue M_ names is also expected to contribute to sales growth in the coming years. A major restructuring of Revco/Lindberg's industrial business resulted in a substantial increase in profits during 1994. Growing demand for industrial furnaces allowed the unit to capture large contracts from Pratt and Whitney for heat-treating furnaces for the production of jet engine components, and from Siemens for a walking beam furnace for a nuclear application. Revco/Lindberg also introduced a leading-edge vertical elevator conveyor oven that features a much smaller footprint, which will enable manufacturers to improve productivity by making the most efficient use of factory space. A sustaining effort to reduce costs and focus on areas of growth should continue to enhance the unit's earnings in the year ahead. Sales for the Process Controls sector's late-cycle businesses will benefit as the economy improves. Margins should also continue to improve as units leverage their competitive positions and realize the benefits of bolt-on acquisitions and new product introductions. [GRAPHICS OMITTED] 9 ELECTRICAL CONTROLS [GRAPHICS OMITTED] 10 General Signal's Electrical Controls sector achieved robust increases in sales and earnings, reflecting stronger operating trends within the fire safety and control, power transformer, and power protection markets. "Bolt-on" acquisitions for the sector's conduit fittings and signaling businesses broadened their product offerings and strengthened distributor relationships, positioning the units for continued growth in the year ahead. GS Building Systems Corporation's life safety and signaling business increased sales for the unit's fire detection systems. Volume was strong in the institutional market with the unit winning new contracts for fire detection systems at the Los Alamos, New Mexico nuclear research facility and the Y-12 Nuclear Facility in Oak Ridge, Tennessee. Integration of the Benjamin Signals product line, acquired this year, enabled the unit to consolidate further its strong market share position with the electrical wholesaler, an effort that will continue as the unit targets competition in specific market categories more directly. New products also helped expand the unit's competitive position. The unit introduced a revolutionary new line of microprocessor-based smoke detectors designed to distinguish between smoldering and flaming fires, virtually eliminating false alarms. This leading-edge technology in fire detection and prevention systems is expected to make a significant contribution to unit sales in 1995. The unit extended its popular line of LED exit signs to offer a new low-watt green exit sign and a version featuring larger lettering. Both products expand the unit's reach to new markets by combining energy efficiency with designs that comply with safety codes in certain regional and building environments. GS Building Systems Corporation was chosen to supply a fully differentiated line of large building fire detection systems for Honeywell Inc. worldwide. The agreement expands the company's international presence and exposure beyond the construction market to include the building automation and security sectors. The consolidation of O-Z/Gedney's electrical fittings business with Sola Electric formed GS Electrical Power Systems Group. This larger unit is capable of providing a more comprehensive array of products to the electrical industry. The combination enhances the critical mass of the new unit, and positions it for future growth. GS Electrical Power Systems Group successfully delivered operating earnings generated by the earlier consolidation of Hevi-Duty's general purpose and control transformer business, gaining leverage and targeting opportunities for growth through its electrical distribution channel. Hevi-Duty's remanufacturing and decommissioning transformer business expanded sales by adding new utility customers in the Midwest and South. Productivity improvements contributed to the significant earnings rise over prior years. The unit's power protection and small transformer products contributed substantially to unit profits as these businesses shifted their focus from lower-margin commodity products to higher value products with unique features to solve power quality problems. A continued emphasis on opportunities in the industrial maintenance and repair and automation market should help the unit maintain the favorable growth established in 1994. A strategic partnership with Hewlett-Packard to supply computers with uninterruptible power protection builds on GS Electrical Power Systems Group's ability to provide both built-in uninterruptible power supply and DC battery back-up technology to the computer market. This core competency will be used to forge partnerships with other global computer manufacturers. In an effort further to support its uninterruptible power supply offerings, the unit also introduced a new line of differentiated products suitable for global distribution. The first off-line and on-line products, which were introduced abroad in 1994, were well received. A third interactive line product is scheduled for introduction in 1995. An aggressive international sales effort netted the unit a contract for three 400 KVA, three-phase uninterruptible power systems to protect the communications network for Moscow's government buildings from power outages. [GRAPHICS OMITTED] 11 The unit will also provide a custom-designed power system to protect the control circuits of a new geothermal power plant in Italy. Sales for power transformers continued to recover. GS Electrical Power Systems Group forged an innovative partnership with a number of investor-owned utilities, including American Electric Power, that will streamline their procurement costs and shorten cycle times, and offer competitive benefits to both businesses. The bolt-on acquisitions of Neer, a manufacturer of zinc die-cast fittings, and Berger Industries' steel fittings division gave the unit the broadest conduit and cable fittings business in the electrical industry. These acquisitions extend the unit's opportunities to include the residential and light commercial construction sectors. New product introductions within the newly consolidated firestop, industrial lighting, and enclosure and control product segments helped the unit boost sales for these products and increase its penetration of the commercial and industrial markets. Sales for heat-trace systems continued to grow strongly, as the unit increased production yields to selected original equipment segments in Canada and Europe. GS Electric's electric motor business achieved record sales and earnings as a result of strong orders in all of its markets, especially floor care and fitness. In response to rising material costs and customer resistance to price increases, the unit focused its efforts on improving operating efficiency, cost reduction, and honing its technical capabilities. GS Electric's position as the leading supplier of low-cost, custom-designed motors to original equipment manufacturers in the floor care, lawn and garden, and exercise markets will enable the unit to participate in market growth from rising consumer demand for these products. GS Electric boosted its sales to the floor care market, developing new motors for applications in upright vacuums, extractors, wet/dry vacuums, and hand held units sold by both existing and new customers. Continued demand for fitness products and increased volume in floor care from product line extensions should help maintain the positive trend in earnings that GS Electric enjoyed in 1994. Dielectric Communications successfully entered four new international markets, supplying radio frequency broadcast equipment for new communications projects in Kuwait, Saudi Arabia, India, and Nigeria. Domestically, Dielectric's sales also improved, as the unit's expertise in broadcast transmission systems resulted in a contract to supply custom antennas, transmission line, and waveguide equipment for a three-TV station project in Madison, Wisconsin. The unit introduced a new water-sealed compressor for its mid-range and large capacity dehydrators, which telephone companies use to pressurize underground cables. The new product is quieter, easier to repair in the field, and includes a complete line of retrofit kits that allow customers to use the compressor in competing water-sealed dehydrators. This new compressor is expected to increase sales of Dielectric's larger capacity dehydrators and off-the-shelf compressors in 1995. While this sector's substantial tie to the nonresidential and nonbuilding construction market will most likely continue to challenge sales growth, 1995 earnings should reflect the sector's strong market positions and improved operating efficiency. [GRAPHICS OMITTED] 12 INDUSTRIAL TECHNOLOGY [GRAPHICS OMITTED] 13 The Industrial Technology sector produced record sales and earnings in 1994, aided by strong performance from the sector's automobile equipment, fare collection, and vending equipment businesses. Continued strong growth in the automotive industry contributed to healthy sales gains for Metal Forge. The unit extended its best-selling product line, the suspension arm assembly, providing a rear suspension wire arm for the 1995 model Chrysler Cirrus and Dodge Stratus mid-size cars. The assembly is expected to improve annual sales over the next several years. A new bicycle crank and sprocket combination, developed for a domestic juvenile "sidewalk bike" also boosted sales and extended the unit's expertise in bicycle parts to the children's market. Sales for replacement auto parts were brisk, as recall campaigns for catalytic converters increased. Sales initiatives in 1995 will develop new markets for these replacement products. Demand for original equipment parts in the automotive market is expected to be strong again in 1995. The consolidation of Tau-tron's telecommunications monitoring and test equipment business, and Telenex, which continued to be the leading provider of switching systems for wide-area networks in 1994, formed GS Telecom Group. This larger unit promises to be highly competitive in the telecommunications marketplace. GS Telecom Group penetrated the local-area network and channel system markets in 1994. The unit established a strong following for its new 2700 LAN/WAN switching system, winning the largest order in its ten-year history from Bell South Telecommunications, Inc. The 2700 system will manage 13,000 ports at six sites within the Bell South network. Unique in the industry, the 2700 allows network managers to connect computers within a local or wide-area network from one central switching system, eliminating the need to rewire networks when employees change workstations. GS Telecom's newest product, the ESCON converter, was developed jointly with IBM as an enhancement to the unit's 2300 Channel Switching System. The converter gives data centers a cost-effective way to connect peripheral equipment, such as disk drives, magnetic tape drives, and printers via fiber optic cabling to host mainframe systems. In addition, the unit introduced the 8800 Series ATM Analyzer, becoming the first supplier in the industry to offer an upgrade to existing equipment used to test integrated voice, data, and video communications. GS Telecom Group continued to build niche markets for its key product lines. The unit's flagship test and monitoring product sector, Network Channel Office Equipment (NCOE), showed continued strength, driven by the market's demand for more test and monitoring services in critical applications. The unit continued to expand its customer base for the Integrated Monitor and Test System (IMATS) and 9001 performance monitor and test product line, as several analog switched-access system accounts upgraded to IMATS and began to integrate their digital and analog test and monitoring systems. In addition, GS Telecom Group introduced a new signaling tester to support the installation of telephone switching equipment in Eastern Europe, Asia, and Latin America, where massive telecommunications network upgrades are underway. Sales and earnings for GFI Genfare set records in 1994, aided by new contracts, product extensions, and entry into new markets. The success of its Ticket Reader/Issuer Machine, first introduced in 1992 as an attachment to bus fareboxes, has given GFI Genfare a leadership position in the transit market that should continue to fuel rapid sales growth in 1995 and 1996. New contracts for more than $30 million in electronic registering fare boxes and fare collection products for transit systems were received in 1994. The unit substantially completed manufacturing of its first postage stamp dispensing machines in 1994, shipping more than 4,000 units to the U.S. Postal Service. The new machine dispenses stamp booklets and single coil stamps, accepts U.S. currency, coins and credit/debit cards, makes change, records the transaction electronically, and issues a receipt. GFI Genfare has developed a range of additional options for the equipment, which should result in additional orders as the Postal Service broadens installation of new machines. The Industrial Technology sector should continue to see good earnings and margins in the year ahead as its businesses benefit from leading market positions, the introduction of new products in 1994, and continued market growth. [GRAPHICS OMITTED] 14 Management's Discussion and Analysis MD&A of Financial Condition and Results of Operations The following discussion should be read in conjunction with the company's consolidated financial statements and notes thereto. All amounts are in millions except per-share data. Results of Operations During 1994, the company reported earnings from continuing operations of $104.1 (or $2.20 per share), compared with $98.1 (or $2.17 per share) during 1993. Results for 1994 and 1993 included the unusual charges and credits discussed below. In addition, all previously reported periods have been restated to exclude discontinued operations (see details on page 30). The year-to-year comparisons exclude these unusual items. To assist the reader, where applicable, we have bracketed the unusual items in the discussion. The table below compares selected operating results on an as reported basis to the results excluding the effect of the unusual items. A brief explanation of the unusual items follows the table.
1994 1993 1994 1994 Analytical 1993 1993 Analytical Year Ended December 31, Reported Analytical(1) Percent Reported Analytical(1) Percent -------------------------------------------------------------------------------- Net sales $1,527.7 $1,527.7 $1,354.2 $1,354.2 Gross margin 418.2 445.9 29.2% 395.2 399.6 29.5% Selling, general and administrative expenses 292.3 276.2 18.1% 259.3 259.3 19.1% Operating earnings 172.1 169.7 11.1% 155.7 140.3 10.4% Earnings from continuing operations $104.1 $104.1 6.8% $98.1 $86.4 6.4% Earnings per share of common stock from continuing operations $2.20 $2.20 $2.17 $1.91 (1) Excludes the effect of items discussed below.
Reliance Merger Break-Up Fee: During the fourth quarter of 1994, the company's planned merger with Reliance Electric was not successfully concluded, and, as a result, the company received a break-up fee of $50.0. The company also incurred $3.8 of net expenses related to the merger. Consolidation of Operations, Asset Valuations and Other Charges: During the fourth quarter of 1994, the company recorded $46.2 of charges related principally to consolidation of certain operations ($11.8), asset valuations ($24.1) and environmental and other issues ($10.3). Management anticipates lower costs in the future primarily from improved productivity and operating unit consolidations. It is expected that approximately $14.0 to $15.0 of these charges will result in cash expenditures in 1995 and 1996. During 1993, the company charged $4.4 to cost of sales to reflect permanent declines in the value of assets. SEO: During 1993, the company substantially completed the divestiture of Semiconductor Equipment Operations with higher than expected proceeds from the sale of these units and lower than expected severance costs. As a result, $53.2 of excess reserves were returned to operating income. At December 31, 1994, the SEO reserves remaining were $18.1 which the company anticipates will be expended in 1995. Restructuring: In 1993, the company provided $15.0 for restructuring, including factory consolidation and rearrangement ($13.1), product restructuring and realignment ($0.9), and reorganization of lines of distribution and administration ($1.0), all related to the continuing operations of the company. Substantially all such activities were completed during 1994. [GRAPHICS OMITTED] 15 Previously Divested Businesses: The company recognized in 1993 an additional $5.2 charge related to previously divested businesses. Adoption of New Accounting Standards: The company adopted SFAS 112, "Employers' Accounting for Postemployment Benefits," effective January 1, 1993. The impact of adopting this standard (shown as the cumulative effect of accounting changes in the statement of earnings) was a non-cash, after-tax charge of $25.3 in 1993. Extraordinary Charge: During 1993, the company extinguished certain high-rate debt resulting in an extraordinary charge of $6.6. Revco Transaction: During 1993, the company recorded a charge of $13.2 for transaction costs and consolidation of its Lindberg unit with Revco. Substantially all such activities were completed during 1994. 1994 Compared with 1993 (Analytical) Revenues: Sales rose 12.8 percent from 1993 to $1,527.7. Domestic sales increased 14.2 percent, reflecting the strength of the domestic economy. Exports increased 13.2 percent, and foreign shipments increased 3.4 percent. Sales in the Process Controls sector were $606.4, up 11.1 percent from 1993. The sector saw increased sales in its vacuum pump lines and its non-ferrous and heat-treat products. In addition, almost one-third of the increase was from the late 1993 acquisition of Layne & Bowler, a municipal water pump manufacturer. Sales in the Electrical Controls sector rose 13.1 percent to $618.6 in 1994, primarily from higher shipments of life safety products, conduit fittings and other electrical products, and electrical motors. 1994 acquisitions contributed $20.0 of the growth in sales of conduit fittings and other electrical products. Industrial Technology sector sales grew 15.8 percent to $302.7. Accounting for this growth were greater shipments of OEM automotive components and bus and rail fare equipment. A significant portion of the increased sales in 1994 resulted from the shipment of U.S. Postal Service stamp vending machines. Costs and Expenses: In 1994, gross margins were flat at 29 percent of sales [excluding unit consolidation, asset valuation and other charges in 1994 of $27.7 and asset valuation charges in 1993 of $4.4]. The ratio of selling, general and administrative expenses to sales improved to 18.1 percent from 19.1 percent a year ago [excluding unit consolidation, asset valuation and other charges in 1994 of $16.1]. Contributing to the lower rate of SG&A expenses to sales were the successful cost reduction efforts undertaken by the company in 1993 and prior years. SG&A expenses included pension credits of $9.7 in 1994 and $8.6 in 1993. These credits resulted from the overfunded pension plan and favorable long-term investment results. Market conditions during 1994 were not favorable and the company anticipates lower pension credits in 1995. Spending on research and development was 3 to 4 percent of sales in both years. Net interest expense of $11.8 decreased from 1993 because of the extinguishment of higher rate debt in 1993 and generally lower average debt levels in 1994. The effective income tax rate was 35 percent in 1994 compared with 29.5 percent in 1993. 1993 income taxes included benefits from adjustments of prior year tax reserves and an increase in the company's deferred tax assets arising from 1993 tax legislation. Earnings improved to $104.1 or $2.20 per share for the year, a 20.5 percent improvement over 1993 comparable results of $86.4 or $1.91 per share. [1994 analytical amounts exclude charges for consolidations of operations, asset valuations and environmental matters of $46.2, the Reliance break-up fee of $50.0, and net expenses of $3.8 incurred in connection with the planned merger. 1993 analytical amounts exclude restructuring charges of $15.0, asset valuation charges of $4.4, previously divested business charges of $5.2, Revco transaction and consolidation charges of $13.2, and a net gain of $53.2 million from divestiture of SEO businesses.] [GRAPHICS OMITTED] 16 1993 Compared with 1992 (Analytical) Revenues: Net sales were flat at approximately $1.35 billion for both years [excluding sales of $135.0 in 1992 from SEO]. A 3.8 percent increase in domestic sales was offset by international and export sales declines. International and export sales were hurt by a generally stronger U.S. dollar and weakened economies in Europe and in Asia, especially Japan. Sales in the Process Controls sector were $545.8, flat compared with 1992 primarily from softer international demand. Sales included $2.7 from the company's acquisition of Layne & Bowler late in 1993. In the Electrical Controls sector, sales were $547.1, down 3.6 percent from 1992 sales of $567.5. Only partially offsetting this decline were strong domestic and international shipments of fire safety control products. A significant portion of the decline was attributable to the sale of Sola's Canadian lighting ballast business ($12.0), declines in orders for electric motors used in floor care products, lower international demand for uninterruptible power systems, and lower sales of hazardous location equipment and medium power transformers. Sales in the Industrial Technology sector of $261.3 were up 15.3 percent from $226.7 in 1992 [excluding $135.0 of sales from SEO], reflecting increased demand for truck products and the impact of the acquisition of Ryken Tube Manufacturing made in 1992. Transit equipment sales also improved in 1993 as several large municipal transit authorities accepted large shipments of turnstiles, TRiMTM fare collection equipment, and token and ticket vending machines. The continued success of the matrix switch product line and other telecommunications products also helped sales. Costs and Expenses: Gross margins [excluding $16.5 of gross margin from SEO in 1992 and $4.4 of asset valuation charges in 1993] were flat as a percentage of sales reflecting the continued pricing pressures experienced by the company and the offsetting cost control measures that were taken earlier this year, including the impact of the restructuring activities and a change in postretirement benefits that reduced annual expense from $11.9 in 1992 to $2.1 in 1993. In addition, the company realized $2.5 of LIFO reserve liquidations in 1993 and $1.1 in 1992 as a result of aggressive inventory management and product cost reduction programs. The ratio of selling, general and administrative expenses to sales improved to 19.1 percent over year ago levels primarily from continued cost control efforts [excluding SEO expense of $23.5 in 1992]. Included in 1993 selling, general and administrative expenses was $1.7 for the incremental cost of SFAS 112, principally related to severance benefits. The company recognized pension credits in operating earnings of $8.6 and $14.0 in 1993 and 1992, respectively. Spending on research and development remained consistent at approximately 4 percent of sales for both years [excluding SEO spending of $22.7 in 1992]. Net interest expense of $16.6 decreased in 1993 from 1992 interest of $24.8 because of the extinguishment of higher rate debt as a result of the equity offering, proceeds from the sale of SEO, and lower interest rates. The effective income tax rate for 1993 was 29.5 percent compared with 33.7 percent for 1992. Liquidity and Capital Resources Net cash provided by operating activities was $111.6 in 1994 compared with $43.0 in 1993. Included in 1994 cash from operations was the Reliance break-up fee of $50.0 less net expenses of $3.8 incurred in connection with the planned merger. Cash expenditures related to SEO divestitures, restructuring and severance were $14.0, $13.0 and $8.0, respectively, in 1994 and $38.0, $22.0 and $8.0, respectively, in 1993. Capital expenditures were $74.8 in 1994 compared with $55.1 in 1993. 1994 capital expenditures included upgrades of the North Aurora, Illinois, LaGrange, Georgia and Rochester, New York manufacturing facilities, development of the Signature SeriesTM smoke detector production facilities, the completion of a new production facility at Revco/Lindberg in Asheville, North Carolina, and a new administrative and technical center in Connecticut for GS Building Systems Corporation. The company anticipates that capital expenditures will be lower in 1995 than in 1994 principally as a result of the discontinued operations. [GRAPHICS OMITTED] 17 Proceeds from the SEO dispositions were $26.2 in 1994 compared with $97.6 in 1993. The company expects to receive proceeds of $145.0 to $175.0 during 1995 from the disposal of the operations discontinued in 1994, with income taxes estimated to be $20.0 to $30.0. The company invested $83.3 in cash for 1994 acquisitions compared with $20.0 in 1993. The company has consistently grown through acquisitions of businesses and product lines, investing approximately $246.0 in cash and common stock during the three years ended December 31, 1994. Four acquisitions were completed in 1994, three during 1993, and nine in 1992. Net cash provided from financing activities was $19.1 in 1994 including net borrowings of $70.9 and dividend payments of $42.6. In 1993, cash of $79.3 was used for financing activities primarily as a result of the payments of debt and dividends ($227.7) offset by the sale of common stock ($139.1). Long-term debt-to-capitalization increased to 32.9 percent at December 31, 1994 from 26.7 percent at December 31, 1993, principally as a result of the company's bolt-on acquisitions during 1994. At the end of 1993, the company had $702.0 of unused lines of credit. During 1994, the company terminated $300.0 of uncommitted and unutilized domestic lines of credit and $19.0 of foreign credit facilities, leaving unused lines of credit of $382.9 (principally committed revolving credit agreements) at December 31, 1994. In January 1995, the company amended its committed revolving credit agreement extending the maturity date to January 2000. Additionally, the company pre- registered $300.0 with the Securities and Exchange Commission under a universal shelf filing dated May 16, 1994, providing the flexibility to issue a broad variety of securities. At December 31, 1994, the company had the full amount available under the universal shelf registration. The company expects that cash provided from operations and unused credit lines will be sufficient to provide for the company's financing needs for the next year. Additional financing may be undertaken as required. At December 31, 1994, the company's balance sheet reflected deferred tax assets of $63.3, which was net of deferred tax liabilities of $121.7 and a valuation allowance of $43.2. The carrying amount of the net deferred tax asset was based on management's assessment of the realizability of the net operating loss carryforwards and deductible items through future taxable earnings or alternative tax planning strategies. The company entered into forward foreign exchange contracts to mitigate the risks of doing business in foreign currencies. Almost one-half of these contracts related to the company's discontinued operations. The company hedges currency exposures of firm commitments and specific assets and liabilities denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impact on earnings. The company's currency exposures vary, but are primarily concentrated in currencies such as the British pound, Canadian dollar, Australian dollar, Swiss franc and Hong Kong dollar. From time-to-time, international cash flow exposures are not hedged if the cost of hedging is considered to outweigh the potential benefit. Translation exposures are not hedged as they do not represent a cash flow exposure to the company. Environmental Matters The company is involved in various stages of investigation and remediation relative to environmental protection matters. A more detailed discussion of environmental matters has been made on page 26 of the notes to the financial statements. Other Matters As a producer of capital goods and equipment, the results of the company's businesses can vary with the relative strength of the economy. Demand for products in the Process Controls sector follows the demand for capital goods orders. The Electrical Controls sector depends upon several markets, principally the nonresidential construction and computer equipment industries. The Industrial Technology sector depends on several markets, primarily automotive, mass transportation, and telecommunications equipment. Mass transportation depends upon continued federal and local government spending, and telecommunications is dependent upon continued research and development and the continued success of new products. While no one marketplace or industry has a major impact on the company's operations or results, the inherent pace of technological changes presents certain risks that the company monitors carefully. Success within all of the company's businesses is dependent upon the timely introduction and acceptance of new products. [GRAPHICS OMITTED] 18 Management's Responsibility for Financial Statements Management is responsible for the preparation of the company's consolidated financial statements and related information appearing in this annual report. Management considers that the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements reasonably present the company's financial position and results of operations in conformity with generally accepted accounting principles. Management also has included in the company's financial statements amounts that are based on estimates and judgments which it views as reasonable under the circumstances. The independent accountants audit the company's consolidated financial statements in accordance with generally accepted auditing standards and provide an objective, independent review of the fairness of reported operating results and financial position. The Board of Directors of the company has an Audit Committee composed of four non-management Directors. The Committee meets at least three times annually with financial management, the internal auditors and the independent auditors to review accounting, control, auditing and financial reporting matters. Edmund M. Carpenter Chairman and Chief Executive Officer Terence D. Martin Executive Vice President and Chief Financial Officer Report of Independent Auditors The Board of Directors and Shareholders General Signal Corporation We have audited the accompanying balance sheet of General Signal Corporation and consolidated subsidiaries as of December 31, 1994 and 1993, and the related statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. 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 that 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 financial position of General Signal Corporation and consolidated subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In 1993, the company changed its method of accounting for postemployment benefits. In 1992, the company changed its method of accounting for income taxes and for postretirement benefits other than pensions. These changes are discussed in the notes to the financial statements. ERNST & YOUNG LLP Stamford, Connecticut January 27, 1995 19 Statement of Earnings
General Signal Corporation and Consolidated Subsidiaries Year Ended December 31, (In millions, except per-share data) 1994 1993 1992 ---- ---- ---- Net sales $1,527.7 $1,354.2 $1,477.8 -------- -------- -------- Cost of sales 1,109.5 959.0 1,070.2 Selling, general and administrative expenses 292.3 259.3 287.7 Transaction and consolidation charge - 13.2 - Disposition of businesses and special items (46.2) (33.0) 85.6 ----- ----- ---- Total operating costs and expenses 1,355.6 1,198.5 1,443.5 ------- ------- ------- Operating earnings 172.1 155.7 34.3 Interest expense, net (11.8) (16.6) (24.8) ----- ----- ----- Earnings from continuing operations before income taxes 160.3 139.1 9.5 Income taxes 56.2 41.0 3.2 ---- ---- --- Earnings from continuing operations 104.1 98.1 6.3 Earnings (loss) from discontinued operations, net of income taxes: Operations 2.4 (31.5) 6.1 Disposal (25.8) - - ----- Earnings before extraordinary charges and cumulative effect of accounting changes 80.7 66.6 12.4 Extraordinary charges - (6.6) (0.3) Cumulative effect of accounting changes - (25.3) (92.4) Net earnings (loss) $80.7 $34.7 $(80.3) ===== ===== ====== Earnings (loss) per share of common stock: Continuing operations $2.20 $2.17 $0.15 Discontinued operations 0.05 (0.70) 0.15 Disposal of discontinued operations (0.54) - - Extraordinary charges - (0.14) (0.01) Cumulative effect of accounting changes - (0.56) (2.21) ----- ----- Net earnings (loss) $1.71 $0.77 $(1.92) ===== ===== ====== Average common shares outstanding 47.3 45.2 41.8 ==== ==== ====
See accompanying notes to financial statements. 20 Balance Sheet
General Signal Corporation and Consolidated Subsidiaries December 31, (In millions) 1994 1993 ---- ---- Assets Current assets: Cash and cash equivalents $0.3 $1.3 Accounts receivable 258.3 255.5 Inventories 213.3 196.3 Prepaid expenses and other current assets 44.5 55.5 Assets held for sale at estimated realizable value 153.6 25.7 Deferred income taxes 47.2 60.3 ---- ---- Total current assets 717.2 594.6 Property, plant and equipment 280.5 263.4 Intangibles 194.3 184.2 Other assets 134.5 134.3 Deferred income taxes 16.1 48.4 ---- ---- Total assets $1,342.6 $1,224.9 ======== ======== Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings and current maturities of long-term debt $2.2 $9.3 Accounts payable 152.9 131.3 Accrued expenses 183.1 177.8 Income taxes 18.9 7.4 ---- --- Total current liabilities 357.1 325.8 ----- ----- Long-term debt, less current maturities 269.1 191.4 Accrued postretirement and postemployment obligations 161.2 173.7 Other liabilities 7.3 8.8 --- --- Total long-term liabilities 437.6 373.9 ----- ----- Shareholders' equity: Common stock: authorized 150.0 shares; issued 63.7 in 1994 and 63.4 in 1993 77.4 77.1 Additional paid-in capital 281.1 272.0 Retained earnings 620.5 583.1 Cumulative translation adjustments (12.1) (8.5) ----- ---- 966.9 923.7 Common stock in treasury, at cost: 16.6 shares in 1994 and 16.0 shares in 1993 (419.0) (398.5) ------ ------ Total shareholders' equity 547.9 525.2 ----- ----- Total liabilities and shareholders' equity $1,342.6 $1,224.9 ======== ========
See accompanying notes to financial statements. 21 Statement of Shareholders' Equity
General Signal Corporation and Additional Cumulative Common Consolidated Subsidiaries Common Paid-In Retained Translation Stock In (In millions, except per-share data) Stock Capital Earnings Adjustments Treasury -------------------------------------------------- Balance at December 31, 1991 $42.2 $313.5 $701.3 $5.5 $(586.0) Restatement for acquisition of Revco 2.6 (63.3) 2.3 - 65.3 Net loss - - (80.3) - - Dividends declared ($0.90 per share) - - (35.2) - - Exercise of stock options and savings and stock ownership plan funding 0.3 12.6 - - 8.7 Translation adjustments - - - (14.5) - ----- ------ ------ ---- ------- Balance at December 31, 1992 45.1 262.8 588.1 (9.0) (512.0) Net earnings - - 34.7 - - Dividends declared ($0.90 per share) - - (39.7) - - Sale of common stock - 20.4 - - 102.9 Stock split 31.6 (31.6) - - - Exercise of stock options and savings and stock ownership plan funding 0.4 20.4 - - 10.6 Translation adjustments - - - 0.5 - ----- ------ ------ ---- ------- Balance at December 31, 1993 77.1 272.0 583.1 (8.5) (398.5) Net earnings - - 80.7 - - Dividends declared ($0.90 per share) - - (43.3) - - Purchase of common stock - - - - (18.5) Exercise of stock options and savings and stock ownership plan funding 0.3 9.1 - - (2.0) Translation adjustments - - - (3.6) - ----- ------ ------ ---- ------- Balance at December 31, 1994 $77.4 $281.1 $620.5 $(12.1) $(419.0) ===== ====== ====== ====== =======
See accompanying notes to financial statements. 22 Statement of Cash Flows
General Signal Corporation and Consolidated Subsidiaries Increase (Decrease) in Cash and Cash Equivalents Year Ended December 31, (In millions) 1994 1993 1992 ---- ---- ---- Cash flows from operating activities: Earnings from continuing operations $104.1 $98.1 $6.3 Adjustments to reconcile earnings to net cash from operating activities: Discontinued operations (23.4) (31.5) 6.1 Disposition of businesses and special items - 10.1 85.6 Deferred income taxes 32.3 (3.7) (38.5) Depreciation and amortization 48.4 46.4 56.7 Pension credits (9.7) (8.6) (14.0) Extraordinary charges on early extinguishment of debt - (6.6) (0.3) Other, net (4.2) 6.6 (2.3) Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable (25.2) 5.3 (2.2) Inventories (26.8) 12.9 (1.5) Prepaid expenses and other current assets (1.0) 5.4 (5.2) Accounts payable 29.5 (2.4) 9.5 Accrued expenses and other (20.3) (75.3) (22.4) Income taxes 7.9 (13.7) (17.2) --- ----- ----- Net cash from operating activities 111.6 43.0 60.6 ----- ---- ---- Cash flows from investing activities: Dispositions 26.2 97.6 6.2 Capital expenditures (74.8) (55.1) (49.9) Acquisitions (83.3) (20.0) (57.3) Other, net 0.5 (1.1) (0.9) --- ---- ---- Net cash from investing activities (131.4) 21.4 (101.9) ------ ---- ------ Cash flows from financing activities: Issuance of long-term debt 77.9 9.3 210.6 Redemption of debt (7.0) (189.8) (144.5) Purchase of common stock (18.5) - - Issuance of common stock 9.3 139.1 10.3 Dividends paid (42.6) (37.9) (35.1) ----- ----- ----- Net cash from financing activities 19.1 (79.3) 41.3 ---- ----- ---- Effect of exchange rate changes on cash (0.3) (0.3) (2.0) ---- ---- ---- Net changes in cash and cash equivalents (1.0) (15.2) (2.0) Cash and cash equivalents at beginning of year 1.3 16.5 18.5 --- ---- ---- Cash and cash equivalents at end of year $0.3 $1.3 $16.5 ==== ==== ===== Interest paid $12.4 $23.6 $30.4 ===== ===== ===== Income taxes paid $21.5 $26.7 $17.0 ===== ===== =====
See accompanying notes to financial statements. 23 Notes to the Financial Statements Accounting Policies Consolidation: The financial statements include the accounts of General Signal Corporation and consolidated subsidiaries after elimination of intercompany accounts and transactions. Investments in unconsolidated companies where management exercises significant influence are accounted for using the equity method. Cash Equivalents: The company considers its highly liquid money market investments with original maturities of three months or less to be cash equivalents. Inventories: Inventories are stated at the lower of cost or market. Cost is primarily determined using the first-in, first-out (FIFO) method. All other inventories are valued using the last-in, first-out (LIFO) method. Property: Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of assets. Leasehold improvements are amortized over the life of the related asset or the life of the lease, whichever is shorter. Intangibles: Intangible assets (primarily the excess of purchase price over the fair value of net assets acquired) are amortized on a straight-line basis over periods not exceeding 40 years. The company periodically reviews the carrying value of intangibles for recoverability in relation to future undiscounted operating earnings. Revenue Recognition: Revenues are primarily recognized as products are shipped and services are rendered. The percentage- of-completion method of accounting is followed for long-term contracts. Under this method, earnings accrue as contracts progress toward completion, generally based on the percentage of costs incurred or the units of product delivered. Environmental: The company's environmental accruals cover all anticipated costs, including capital expenditures, investigation, remediation, and operation and maintenance of clean-up sites. Environmental obligations generally are not discounted and are not reduced by anticipated insurance recoveries. Postemployment Benefits: Effective January 1, 1993, the company adopted the accrual method (FAS 112) of accounting for postemployment benefits, primarily severance and long-term disability. Previously, the company had used the pay-as-you-go method. The cumulative effect at January 1, 1993 of adopting FAS 112 reduced 1993 net income by $25.3, net of $12.7 of income tax benefits. Earnings Per Share: Earnings per share of common stock was calculated by dividing net earnings by the weighted average number of common shares outstanding. There was no dilutive impact from stock options or convertible debt securities outstanding during the period. Reclassifications: Certain reclassifications were made to conform prior years' data to the current presentation. Accounts Receivable Accounts receivable are net of allowances for doubtful accounts of $10.1 and $10.5 at December 31, 1994 and 1993, respectively. Inventories December 31, 1994 1993 ---- ---- Finished goods $62.1 $56.1 Work in process 68.0 63.3 Raw material and purchased parts 106.4 104.0 ----- ----- Total FIFO cost 236.5 223.4 Excess of FIFO cost over LIFO inventory value (23.2) (27.1) ----- ----- Net carrying value $213.3 $196.3 ====== ====== Inventories valued using LIFO were approximately $66.4 and $70.6 at December 31, 1994 and 1993, respectively. During 1993 and 1992, reductions in inventory quantities resulted in liquidations of LIFO inventory layers carried at lower costs prevailing in prior years as compared with the costs in 1993 and 1992. The effects were to reduce the amount of beginning LIFO reserves and increase before-tax income by $2.5 and $1.1 in 1993 and 1992, respectively. Had cost of sales related to the LIFO inventory layers that were liquidated been valued using current costs, the effects would have been to decrease net earnings $1.3 or $0.03 per share in both 1993 and 1992. During 1994, $3.9 of LIFO reserves related to discontinued operations were reclassified to assets held for sale at estimated realizable value. Progress payments, netted against work in process at year end, were $4.7 in 1994 and $4.1 in 1993. 24 Contracts in Progress Prepaid expenses and other current assets included contracts in progress of $30.8 and $46.0 at December 31, 1994 and 1993, respectively. Contracts in progress represent revenue recognized on a percentage-of-completion basis over related progress billings of $72.6 and $122.3 at December 31, 1994 and 1993, respectively. Substantially all contracts in progress at year-end are billed during the subsequent year. Property, Plant and Equipment December 31, 1994 1993 ---- ---- Land $9.1 $12.3 Buildings and leasehold improvements 138.4 157.0 Machinery and equipment 464.3 466.0 ----- ----- 611.8 635.3 ----- ----- Less accumulated depreciation and amortization (331.3) (371.9) ------ ------ $280.5 $263.4 ====== ====== Income Taxes For financial reporting purposes, earnings from continuing operations before income taxes includes the following components: 1994 1993 1992 ---- ---- ---- Pretax income: United States $159.3 $137.9 $(2.0) Foreign 1.0 1.2 11.5 --- --- ---- $160.3 $139.1 $9.5 ====== ====== ==== The reconciliation of income tax computed at the U.S. federal statutory tax rate to the company's effective income tax rate is: Year Ended December 31, 1994 1993 1992 ---- ---- ---- Tax at U.S. federal statutory rate 35.0% 35.0% 34.0% State and local income taxes, net of U.S. federal benefit 3.4 2.7 5.7 Foreign sales corporation (1.4) (1.5) (19.6) Goodwill amortization 1.0 1.3 14.0 Income from Puerto Rican operations (0.8) (0.7) (16.5) Foreign rates and foreign dividends (1.1) (0.9) (1.4) Effect of enacted U.S. federal rate change on deferred taxes - (2.0) - Adjustments to prior years' tax liabilities - (2.6) - Other (1.1) (1.8) 17.5 ---- ---- ---- Total 35.0% 29.5% 33.7% ==== ==== ==== The components of the provision for income taxes are as follows: 1994 1993 1992 ---- ---- ---- Current: Federal $11.5 $(1.1) $5.3 Foreign 4.6 (0.4) 7.5 State 3.3 0.5 0.6 --- --- --- Total current 19.4 (1.0) 13.4 ---- ---- ---- Deferred: Federal 51.5 9.9 (58.3) Foreign 0.4 (0.9) (0.9) State 9.5 3.0 (10.7) --- --- ----- Total deferred 61.4 12.0 (69.9) ---- ---- ----- $80.8 $11.0 $(56.5) ===== ===== ====== Income tax expense is included in the financial statements as follows: 1994 1993 1992 ---- ---- ---- Continuing operations $56.2 $41.0 $3.2 Discontinued operations 24.6 (13.2) 3.1 Extraordinary charges - (4.1) (0.2) Cumulative effect of accounting changes - (12.7) (62.6) ---- ---- ----- $80.8 $11.0 $(56.5) ===== ===== ====== Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the company's deferred tax assets and liabilities are as follows: 1994 1993 ---- ---- Deferred tax assets: Acquired tax benefits and basis differences $52.0 $58.4 Other postretirement and postemployment benefits 70.0 73.1 Losses on dispositions and restructuring 21.0 27.6 Inventory 15.1 14.0 NOL and credit carryforwards 46.0 27.8 Other 24.1 23.0 ---- ---- Total deferred tax assets 228.2 223.9 Valuation allowance (43.2) (43.2) ----- ----- Net deferred tax assets 185.0 180.7 ----- ----- Deferred tax liabilities: Accelerated depreciation 28.8 29.8 Pension credits 34.0 24.2 Reliance gain 19.8 - Discontinued operations 23.0 - Other 16.1 18.0 ---- ---- Total deferred tax liabilities 121.7 72.0 ----- ---- $63.3 $108.7 ===== ====== 25 Based on management's assessment, it is more likely than not that the net deferred tax assets will be realized through future taxable earnings or alternative tax strategies. In the event that the tax benefits relating to the valuation allowance are subsequently realized, $6.6 of such benefits would reduce goodwill. At December 31, 1994, the company had the following net federal operating loss and tax credit carryforwards available: Expiration Operating Tax Dates Losses Credits ----- ------ ------- 1995 - 1996 $ - $8.7 1997 - 1998 6.4 15.6 1999 - 2000 35.4 3.7 2001 - 2002 31.8 - No expiration - 2.7 Undistributed earnings of the company's foreign subsidiaries amounted to approximately $57.3 at December 31, 1994. Those earnings are considered to be indefinitely reinvested and accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. Upon distribution of those earnings, the company would be subject to U.S. income taxes (subject to a reduction for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable; however, unrecognized foreign tax credit carryovers would be available to reduce some portion of the U.S. liability. Withholding taxes of approximately $4.9 would be payable upon remittance of all previously unremitted earnings at December 31, 1994. Debt December 31, 1994 1993 ---- ---- 5.75% Convertible Subordinated Debentures due 2002 $100.0 $100.0 Commercial paper 1994, 6.1%; 1993, 3.4% 85.7 9.7 Industrial Revenue Bonds due 2000-2014; no stipulated principal repayments prior to maturity (primarily variable rate) 45.7 45.7 Notes due 1995 7.14% 25.0 25.0 Other long-term borrowings 13.8 14.1 ---- ---- 270.2 194.5 ----- ----- Less current maturities 1.1 3.1 --- --- $269.1 $191.4 ====== ====== Maturities of long-term debt through 1999 are: 1995 $1.1; 1996 $8.6; 1997 $0.4; 1998 $0.3; and 1999 $0.2. Short-term notes payable to banks were $1.1 and $6.2 as of December 31, 1994 and 1993, respectively. During 1993, a portion of the proceeds from the issuance of common stock and the sale of SEO was used for the early extinguishment of higher-rate debt and swap agreements, which resulted in an extraordinary charge of $10.7 (net of tax, $6.6). The Convertible Subordinated Notes are convertible into the company's common stock at a conversion rate of approximately $39.50 per share. The company maintains credit arrangements with banks in the U.S. and abroad, which aggregated $382.9 and $702.0 at December 31, 1994 and 1993, respectively. At year-end 1994, the company had two revolving credit agreements of $160.0 and $200.0 which matured on January 12, 1995. The $160.0 credit agreement expired and the $200.0 credit agreement was amended by increasing the amount to $360.0 and extending the maturity date to January 11, 2000. The agreement permits domestic and Eurodollar borrowings at interest rates offered to investment grade customers. The agreement is also convertible into a one-year term loan at maturity. Commercial paper and notes due 1995 are classified as long-term debt as the company intends to refinance them on a long-term basis either through continued short-term borrowing or available credit facilities. In May 1994, the company established a $300.0 financing program under a universal shelf registration that permits the issuance of debt, equity and equity-linked securities, replacing an earlier shelf registration for only debt securities that had been in place since April 1990. The universal shelf registration permits the company to issue junior or senior debt, convertibles, equity warrants, preferred shares and medium-term notes under one filing without specifying any dollar amounts for any security. As of December 31, 1994, no amounts had been issued under the shelf registration. The company entered into an interest rate exchange agreement, expiring in 2000, with a financial institution to limit exposure to interest rate volatility. The agreement involved a transaction with a notional principal amount of $25.0 and $25.0 at December 31, 1994 and 1993, respectively. In 1992, the company also entered into an interest rate exchange agreement to reduce the borrowing cost associated with the $25.0 notes due 1995. The company monitors the risk of default by the swap counterparties and does not anticipate non-performance. 26 Foreign Exchange Contracts The company conducts its business in various foreign currencies. Accordingly, it is subject to transaction exposures that arise from foreign exchange rate movements between the dates that foreign currency transactions are recorded and the dates they are consummated. The company utilized some natural hedging to reduce these transaction exposures. The company also entered into forward exchange contracts to hedge certain foreign currency transactions for periods consistent with the terms of the underlying transactions for periods through October 1997. These contracts did not subject the company to currency risk from exchange rate movements, as gains and losses on these contracts are deferred and offset against losses and gains on the underlying transactions. At December 31, 1994, the company had approximately $56.3 of such contracts outstanding, including $26.2 related to discontinued operations. Fair Value of Financial Instruments Cash and cash equivalents, short- and long-term debt, and foreign currency and interest rate exchange contracts had fair values, based upon quoted prices or discounted cash flow analyses, that approximated their carrying amounts. Financial guarantees and letters of credit were issued by the company in the ordinary course of business as required and had a fair value of approximately $22.0 as of December 31, 1994. The fair values of financial guarantees and letters of credit were based on the face value of the underlying instruments and the related amounts accrued. Contingencies and Commitments Litigation: 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 or results of operations. Leases: The future minimum rental payments under leases with remaining noncancelable terms in excess of one year are: Year Ending December 31, 1995 $11.5 1996 8.0 1997 6.2 1998 4.8 1999 4.7 Subsequent to 1999 7.3 --- Total minimum payments $42.5 ===== Minimum payments exclude sublease rentals of $5.5 under noncancelable subleases. Total rent expense in 1994, 1993, and 1992 was $17.4, $13.8, and $20.0, respectively. 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 include waste disposal sites. In certain instances, the company may be exposed to joint and several liability for remedial action or damages. The company, along with several other entities, has been named as a Potentially Responsible Party for remedial costs at certain third-party sites listed on the National Priorities List under CERCLA. The potential costs related to such matters 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. Capital Stock Preferred Stock: Ten million shares of cumulative preferred stock, par value $1.00 per share, are authorized but unissued. Common Stock: The 1,960,000 shares issued through 1969 have a par value of $6.67 per share. Shares issued since then have a par value of $1.00 per share. Treasury Stock: Number of shares (In millions) 1994 1993 1992 ---- ---- ---- Balance at beginning of year 16.0 20.6 23.6 Restatement for the acquisition of Revco - - (2.6) Common stock reacquired 0.6 - - Common stock sold - (4.1) - Common stock issued under the company's incentive compensation and savings and stock ownership plans - (0.5) (0.4) ---- ---- Balance at end of year 16.6 16.0 20.6 ==== ==== ==== 27 In March 1994, the company's board of directors approved a program to repurchase up to 3.4 percent or 1.6 million shares of the common stock outstanding at that time. These shares will be purchased systematically over two years in open market transactions, and will be used to offset dilution from the expected increased exercise of employee stock options arising from the company's executive stock ownership program. To date, approximately 600 thousand shares have been repurchased under the program. Common Stock Purchase Rights: On March 7, 1986, the Board of Directors declared a dividend distribution of one common stock purchase right (Right) for each share of company common stock. The Rights expire on March 21, 1996, unless redeemed earlier by the company. Each right entitles its registered holder to purchase from the company one share of the company's common stock at a price of $75 per share, subject to adjustment to prevent dilution. The Rights are not exercisable and cannot be transferred separately from the company common stock until: 1) a person or group publicly announces the acquisition of, or obtains the right to acquire, 20% or more of the outstanding shares of the company's common stock; or 2) a tender or exchange offer is announced or commenced that would result in such an acquisition. Within 10 days after such a 20% interest has actually been obtained, the company is entitled to redeem all of the Rights at a price of five cents per Right. If certain triggering events occur, and unless the Rights are redeemed by the company, the Rights holder is entitled to receive for $75 per Right the number of shares of the company's or an acquiring company's common stock having a market value of $150 per share, subject to adjustment to prevent dilution. This provision does not apply to Rights that are beneficially owned by the acquirer. These triggering events are: 1) the company is acquired in a merger or other business combination transaction; 2) 50% or more of the company's assets or earnings power are sold; 3) an acquirer engages in one of a number of self-dealing transactions specified in the Rights Agreement; or 4) an acquirer becomes the beneficial owner of 20% or more of outstanding shares of the company's common stock. Employee Benefit Plans Pension Plans: The company's pension plans cover substantially all salaried and hourly paid employees, including certain employees in foreign countries. The plans generally provide benefit payments using a formula based on an employee's compensation and length of service or, in some cases, stated amounts for each year of service. The company funds United States pension plans in amounts equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts that may be approved from time to time. Substantially all plan assets are invested in cash and short-term investments or listed stocks and bonds and real estate. Plan assets and obligations of non-U.S. subsidiaries were not material. The periodic net pension income related to continuing operations is comprised of the following: Year Ended December 31, 1994 1993 1992 ---- ---- ---- Service cost-benefits earned during the period $12.2 $11.9 $11.9 Interest cost on projected benefit obligation 31.4 32.2 30.3 Actual return on assets 12.5 (58.3) (18.8) Net amortization and deferral (67.9) 3.5 (39.5) Amounts allocated to discontinued operations 2.1 2.1 2.1 --- --- --- Net pension income $(9.7) $(8.6) $(14.0) ===== ===== ====== The following table shows the plans' funded status and amounts recognized in the balance sheet: December 31, 1994 1993 ---- ---- Actuarial present value of benefit obligations: Vested benefit obligation $(359.9) $(407.0) ======= ======= Accumulated benefit obligation $(378.4) $(430.8) ======= ======= Fair value of plan assets $503.1 $554.1 Projected benefit obligation (397.4) (448.2) ------ ------ Plan assets in excess of projected benefit obligation 105.7 105.9 Unrecognized net loss 10.0 4.0 Prior service cost not yet recognized in net pension cost 9.0 11.1 Unrecognized net asset (41.0) (49.2) ----- ----- Prepaid pension $83.7 $71.8 ===== ===== The actuarial assumptions used were: Discount rate 8.75% 7.40% Rate of increase in compensation levels 5.00% 5.00% Expected long-term rate of return on assets 9.50% 9.50% ---- ---- Under the Savings and Stock Ownership Plan and other supplemental plans, the company matches employee contributions in cash and common stock equal to a percentage of certain amounts contributed by employees. The company contributions under these plans amounted to $7.9 in 1994, $8.3 in 1993, and $8.7 in 1992 and were invested in shares of the company's common stock. At December 31, 1994, 1,452,000 shares were reserved for issuance under these plans. Nonpension Retirement Benefits: The company and its U.S. subsidiaries have postretirement plans that provide health and life insurance benefits for retirees. Some of these plans require employee contributions at varying rates. Not all employees are eligible to receive these benefits, with eligibility governed by the plan in effect at a particular location. 28 Effective January 1, 1992, the company changed its method of accounting for postretirement benefits other than pensions from the pay-as-you-go method to the accrual method as required by FAS 106. As permitted under the new rules, prior years' financial statements have not been restated. The cumulative effect of adopting FAS 106 as of January 1, 1992 resulted in a charge of $96.0 to 1992 earnings, net of approximately $59.0 of income tax benefits. The impact of the change on 1992 earnings from continuing operations was a reduction of approximately $4.7. The accumulated postretirement benefit obligation at December 31, 1994 was determined using the terms of the company's various plans, together with relevant actuarial assumptions and health care cost trend rates projected at estimated annual rates ranging from 8.2 percent in 1994 and 7.6 percent in 1995 to 5.5 percent through the year 2004 and a weighted average discount rate of 8.75 percent. Generally, where applicable, the discount rate and the actuarial assumptions used for pension plans also apply to the non-pension retirement plans. A one percent annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation by approximately $1.7 and annual service costs by approximately $0.2. Certain of the company's non-U.S. subsidiaries have similar plans for retirees. The company's obligations for such plans are not material. During 1993, the company changed its postretirement health benefit plans to cap certain costs and require the coordination of benefits with Medicare in certain instances beginning January 1, 2000. The effect of these changes was to reduce 1993 expense by $3.4 and to reduce the accumulated postretirement benefit obligation. Future years' expense will be similarly affected by these changes. The net periodic postretirement benefit cost related to continuing operations is comprised of the following: 1994 1993 1992 ---- ---- ---- Service cost for benefits attributed to service during the period $0.7 $0.9 $1.8 Interest cost on the accumulated postretirement benefit obligation 7.3 9.6 12.9 Net amortization and deferral (4.9) (4.4) (0.1) Amounts allocated to discontinued operations (4.0) (4.0) (2.7) ---- ---- ---- Net periodic postretirement benefits $(0.9) $2.1 $11.9 ===== ==== ===== The unrecognized prior service cost at December 31, 1994 and 1993 represents unamortized amounts for plan amendments resulting from revisions to company-sponsored health plans, which reduced benefit levels. The following table shows the plans' funded status and amounts recognized in the balance sheet as of December 31, 1994 and 1993:
December 31, 1994 December 31, 1993 Health Life Health Life ------------------------------------------- Accumulated postretirement benefit obligation: Retirees $(68.7) $(14.5) $(78.7) $(13.9) Fully eligible active plan participants (2.3) (0.7) (6.6) (4.6) Other active plan participants (10.4) (6.5) (12.3) (2.8) ----- ---- ----- ---- Total (81.4) (21.7) (97.6) (21.3) Unrecognized net (gain) loss (12.3) 1.2 1.5 1.6 Unrecognized prior service cost (30.4) - (40.6) - ----- ----- ---- Accrued postretirement benefit cost (124.1) (20.5) (136.7) (19.7) Less amounts classified as current 8.0 0.6 8.0 0.6 --- --- --- --- $(116.1) $(19.9) $(128.7) $(19.1) ======= ====== ======= ======
Stock Incentive Program The company has a stock incentive program whereby executive officers and designated employees have been or may be granted restricted stock and options to purchase shares of company common stock. Restricted stock awards were granted during 1994 and 1993 for 22,900 shares and 8,200 shares of company common stock, respectively. The shares covered by the restricted stock award granted in 1994 vest at a rate of 331/3 percent per year over a three-year period, and the awards granted in 1993 vest at a rate of 20 percent per year over a five-year period. In addition, non-employee directors may elect to defer all or part of their cash compensation as a director and to receive in lieu thereof restricted stock. During 1994, five non-employee directors received 4,400 shares of company common stock subject to a five-year restriction period. Options under all the plans are exercisable during specified dates at prices at least equal to 100 percent of the fair market value on the date of grant. The options granted during 1994 and 1993 were at 100 percent of the fair market value of the company's common stock at the date of grant. 3,145,900 and 3,470,000 shares of company common stock were reserved for issuance as of December 31, 1994 and 1993, respectively. 29 Shares Option Price Option Activity: (In Millions) per Share Options outstanding at December 31, 1991 2.7 $19.44-$31.00 Options granted - - Options exercised (0.5) $19.44-$29.25 Options terminated - - ---- ------------- Options outstanding at December 31, 1992 2.2 $19.44-$36.20 Options granted 0.3 $32.25-$34.88 Options exercised (0.6) $19.44-$30.32 Options terminated - - ---- ------------- Options outstanding at December 31, 1993 1.9 $19.44-$36.20 Options granted 0.6 $31.88-$37.25 Options exercised (0.3) $19.44-$32.25 Options terminated - - ---- ------------- Options outstanding at December 31, 1994 2.2 $19.44-$37.25 === ============= Options exercisable: 1994 1.0 $19.44-$34.88 1993 1.0 $19.44-$31.38 Business Combinations In August 1994, the company negotiated an agreement to merge with Reliance Electric Company. However, subsequent to the consummation of the agreement, Reliance was acquired by another company in a cash tender offer. Under the terms of the merger agreement, the company received $50.0 in break-up fees and $5.2 in reimbursement of expenses. The company incurred $9.0 of transaction costs in connection with the merger. During 1993, the company acquired Revco Scientific, Inc. (Revco) in exchange for 2,631,210 shares of common stock, and accounted for the acquisition as a pooling of interests. Principally as a result of the acquisition, the company incurred transaction and consolidation costs of $13.2. The transaction costs included investment banker and other professional fees. The consolidation and integration costs included provisions for streamlining marketing and distribution arrangements, consolidation of field service and sales offices, relocation of certain product lines and key personnel, and severance-related costs, primarily at the company's locations existing prior to the merger. Charges of $2.3 also were made during the second quarter of 1993 to conform Revco's accounting practices to the company's accounting policies and practices principally for inventory and warranties. During 1994, $1.5 of excess reserves were returned to earnings. During the three-year period ended December 31, 1994, the company acquired the 16 entities described below for cash and common stock valued at $246.0 plus, in certain instances, amounts that are contingent upon future earnings, and liabilities assumed. The acquisitions, except Revco, were accounted for as purchases and accordingly, the results of operations of the acquired companies are included in the statement of earnings for the periods during which they were owned by the company. Principal Business Date Acquired Fairbanks Morse Water treatment, December 1994 Pump Corporation irrigation, residential and general industrial- use pumps Neer Zinc die-cast fittings April 1994 Manufacturing, Inc. Assets of Berger Steel fittings March 1994 Industries, Inc. Benjamin Signals Audible and visual March 1994 signal products Layne & Bowler Vertical turbine pumps November 1993 Jannette Drives Drive units for dampers November 1993 and valves primarily used for utilities Revco Ultra-low temperature October 1993 Scientific, Inc. freezers, laboratory refrigerators, and CO2 incubators Northwest Metal tubing, November 1992 Alabama connectors, and Industries couplings Ryken Tube Automotive tubular October 1992 Manufacturing replacement parts Unival Ported gate valves August 1992 Valex's magnetic Magnetic mixers July 1992 mixer product line GMV Fixed mount and July 1992 portable mixers Fire Alarm Advanced fire alarm April 1992 and Systems control products Technology, Inc. Associated Hazardous location March 1992 Lighting conduits and fittings ABB's Uninterruptible power January 1992 Uninterruptible supplies Power Supply Division Real Time Multichannel signal January 1992 Techniques testing equipment 30 Discontinued Operations In November 1994, the company adopted a plan to sell Leeds & Northrup Company, formerly a part of the Process Controls business sector, and Dynapower/ Stratopower, formerly a part of the Industrial Technology sector (the operations). The operations have been accounted for as discontinued operations, and the consolidated financial statements have reported separately their net assets and operating results. Net assets of the operations at December 31, 1994 consisted primarily of working capital ($73.0), property, plant and equipment ($43.1) and intangibles ($37.5) amounting to $153.6 after deducting an allowance for estimated loss on disposal and including expected postretirement benefit plan curtailment gains and operations through the expected disposal dates in 1995. The loss on disposal of these operations of $25.8 includes $23.4 of tax charges primarily resulting from differences in carrying values for financial reporting and tax purposes, and from adjustments related to tax planning strategies that will not be utilized as a result of the planned disposal of the operations. From the measurement date to the end of the year, the operations incurred after-tax operating losses of $1.6 million. Sales of the discontinued operations from January 1 to the measurement date and for the years ended December 31, 1993 and 1992 were $155.2, $175.8 and $196.4, respectively. During 1994, the company recognized as part of earnings from discontinued operations $6.1 of before-tax curtailment gains related to Leeds & Northrup's nonpension postretirement benefits plan. During 1993, the company recorded a $14.4 before-tax charge related to the remaining portion of the discontinued transportation businesses, primarily Dynapower/Stratopower, and for environmental and contractual obligations retained related to New York Air Brake and General Railway Signal. This provision, which was reclassified to discontinued operations in 1994, was made primarily to write these operations down to estimated realizable value and to recognize 1993 operating losses. Disposition of Businesses and Special Items During the fourth quarter of 1994, the company recognized $46.2 million of charges for the consolidation of operations ($11.8), asset valuations ($24.1), environmental matters ($4.9) and other issues ($5.4), all related to the continuing operations of the company. The charges are included in cost of sales ($27.7), selling, general and administrative expenses ($16.1), and income taxes ($2.4). During 1993, $30.5 was provided for factory consolidation and rearrangement ($20.9), product restructuring and realignment ($6.8), and reorganization of lines of distribution and administration ($2.8). The activities related to these charges were substantially completed during 1994, and $3.5 of excess reserves were returned to earnings. Included in this charge was $15.5 related to operations discontinued in 1994. During 1993, the company provided a $22.5 charge in cost of sales to reflect a continuing review of world-wide assets to identify any permanent declines in the value of assets. Included in this charge was $18.1 related to operations discontinued in 1994. Also in 1993, the company recorded a charge of $5.2 related to other previously divested operations At the beginning of the fourth quarter of 1992, the company adopted a plan to divest its semiconductor equipment operations. The company recorded a before-tax charge of $85.6 ($58.2 net of tax benefits) to provide for net losses on dispositions ($23.6), estimated operating losses of the operations through disposition ($18.0), severance ($12.0), idle facilities resulting from the disposition ($30.0), and restructuring costs ($2.0). During 1993 and 1994, the company completed the sale of the semiconductor businesses. In connection with these operations, the company incurred approximately $13.8 in 1994 and $38.4 in 1993 of operating losses, severance payments, idle facility costs, and restructuring costs. The company also realized $53.2 in 1993 of excess reserves relating to the disposition of the semiconductor equipment operations as a result of higher proceeds from the sale of units and lower severance costs. 31 Business Sector Information
Product Sectors 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Net sales: Process Controls $606.4 $545.8 $548.7 $515.8 $540.9 Electrical Controls 618.6 547.1 567.5 515.4 503.2 Industrial Technology 302.7 261.3 226.7 392.9 439.8 Dispositions - - 134.9 - 13.3 ---- ---- ----- ---- ---- $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.2 ======== ======== ======== ======== ======== Operating earnings: Process Controls $66.8(1) $45.1(2) $60.5 $73.3 $77.7 (4) Electrical Controls 30.7(1) 29.2(2) 43.1 43.9 47.0 (4) Industrial Technology 47.4(1) 44.8 33.1 18.3 (51.7)(4) Prior dispositions - - (7.4) - (7.9) Dispositions and special items 46.2 48.0(3) (85.6) - (5.5) ---- ---- ---- ---- ---- 191.1 167.1 43.7 135.5 59.6 Equity income 1.0 0.2 1.9 2.1 2.0 Interest expense, net (11.8) (16.6) (24.8) (28.0) (31.5) Unallocated expenses (20.0) (11.6) (11.3) (12.2) (14.6) ----- ----- ----- ----- ----- Earnings from continuing operations before income taxes $160.3 $139.1 $9.5 $97.4 $15.5 ====== ====== ==== ===== ===== Identifiable assets: Process Controls $391.4 $474.3 $477.0 $473.9 $516.7 Electrical Controls 399.4 326.5 330.8 295.7 287.0 Industrial Technology 181.3 167.2 181.7 305.4 329.8 Assets of discontinued operations - - - - - ---- ---- ---- ---- ---- 972.1 968.0 989.5 1,075.0 1,133.5 General corporate assets 196.5 213.1 160.3 89.0 105.0 Assets held for sale at estimated realizable value 153.6 25.7 91.1 - 42.6 Investments in and advances to affiliates 20.4 18.1 17.5 16.2 13.5 ---- ---- ---- ---- ---- Total assets $1,342.6 $1,224.9 $1,258.4 $1,180.2 $1,294.6 ======== ======== ======== ======== ======== Depreciation and amortization of fixed assets(6): Process Controls $16.6 $12.4 $12.9 $11.4 $11.5 Electrical Controls 14.5 13.0 12.3 11.8 11.5 Industrial Technology 6.4 6.4(5) 6.7 14.7 16.0 Capital expenditures(6): Process Controls $28.7 $23.1 $19.7 $16.4 $15.3 Electrical Controls 21.8 22.3 19.5 15.1 12.5 Industrial Technology 11.4 7.7(5) 5.0 10.9 15.3 (1) Includes 1994 charges in Process Controls ($11.9), Electrical Controls ($19.2) and Industrial Technology ($9.9) for the consolidation of operations, asset valuations, environmental and other. (2) Includes 1993 charges in Process Controls ($22.1) and Electrical Controls ($10.5) for asset valuations, restructuring, and transaction and consolidation charges related to Revco. (3) Represents credits for the divested semiconductor operations ($53.2) and charges for the transportation businesses ($5.2). (4) Includes charges for restructuring in Industrial Technology ($77.6) and Electrical Controls ($0.2). (5) Excludes semiconductor equipment operations. (6)Excludes discontinued operations.
32
Geographic Areas 1994 1993 1992 1991 1990 Net sales: United States $1,390.0 $1,218.9 $1,290.4 $1,225.4 $1,301.4 Foreign 180.7 173.7 238.5 257.7 257.8 Intergeographic (43.0) (38.4) (51.1) (59.0) (62.0) ----- ----- ----- ----- ----- $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.2 ======== ======== ======== ======== ======== Operating earnings: United States $135.7 $113.4 $118.5 $118.1 $49.2 Dispositions and special items 46.2 48.0 (85.6) - - Foreign 9.2 5.7 10.8 17.4 10.4 --- --- ---- ---- ---- $191.1 $167.1 $43.7 $135.5 $59.6 ====== ====== ===== ====== ===== Identifiable assets: United States $875.8 $822.5 $769.2 $838.5 $920.0 Foreign 96.3 145.5 220.3 236.5 213.5 ---- ----- ----- ----- ----- $972.1 $968.0 $989.5 $1,075.0 $1,133.5 ====== ====== ====== ======== ======== Export sales to unaffiliated customers(1) $125.4 $110.9 $131.9 $130.5 $112.8 ====== ====== ====== ====== ====== (1) Included in United States sales.
Quarterly Financial Information (Unaudited)
First Second Third Fourth 1994 1993 1994 1993 1994 1993 1994 1993 Net sales $342.4 $334.0 $378.6 $340.6 $390.0 $328.7 $416.7 $350.9 Gross profit 99.4 95.4 109.7 94.4 113.7 100.6 95.4 104.8 Earnings from continuing operations 22.2 16.2 25.3 36.6 27.5 24.5 29.1 20.8 Discontinued operations 2.4 1.8 (0.3) (17.3) 0.3 (0.1) - (15.9) Disposal of discontinued operations - - - - - - (25.8) - Extraordinary charge - - - (6.6) - - - - Cumulative effect of accounting changes - (25.3) - - - - - - ----- ----- ----- ----- ----- ----- ---- ---- Net earnings (loss) $24.6 $(7.3) $25.0 $12.7 $27.8 $24.4 $3.3 $4.9 ===== ===== ===== ===== ===== ===== ==== ==== Earnings (loss) per share of common stock: Continuing operations $0.47 $0.38 $0.53 $0.83(1) $0.58 $0.52 $0.62(2)(4) $0.44(3)(4) Discontinued operations 0.05 0.04 - (0.39) 0.01 - (0.34) Disposal of discontinued operations - - - - - - (0.55) - Extraordinary charge - - - (0.15) - - - - Cumulative effect of accounting changes - (0.60) - - - - - - ----- ----- ----- ----- ----- ----- ---- ---- Net earnings (loss) $0.52 $(0.18) $0.53 $0.29 $0.59 $0.52 $0.07 $0.10 ===== ====== ===== ===== ===== ===== ===== ===== Common stock price range - high 38 31 7/8 34 5/8 33 7/8 37 1/2 33 7/8 37 1/4 37 7/8 - low 32 1/2 30 1/8 30 1/8 30 1/16 32 1/4 30 1/2 31 31 1/2 ====== ====== ====== ======= ====== ====== == ====== Note: The sum of the quarters' earnings per share does not equal the full year per-share amounts. (1) Includes $0.68 of credits for reversal of excess SEO reserves, $0.24 of charges for restructuring, and $0.06 of charges for asset valuations. (2) Includes $0.64 of charges for consolidation of operations, asset valuations, environmental and other, $0.64 of proceeds from Reliance Electric, $0.07 of credits for reversal of excess restructuring and consolidation reserves upon completion of those programs, and $0.03 of charges for acquisition integration activities. (3) Includes $0.16 of credits for reversal of excess SEO reserves, and $0.20 of charges for Revco transaction and consolidation costs. (4) LIFO liquidations benefitted the fourth quarter of 1993 by $0.03, and had no impact in the fourth quarter of 1994.
33 Supplementary Information
December 31, 1994 1993 ---- ---- Intangibles: Excess of cost over net assets acquired $210.9 $219.8 Other intangibles 35.0 32.6 ---- ---- 245.9 252.4 Accumulated amortization (51.6) (68.2) ----- ----- $194.3 $184.2 ------ ------ Accrued expenses: Dispositions and special items $37.1 $35.1 Payroll and compensation 37.8 34.4 Environmental and legal 20.7 18.0 ---- ---- Year Ended December 31, 1994 1993 1992 ---- ---- ---- Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired $105.4 $24.4 $68.5 Cash paid (83.3) (20.0) (57.3) ----- ----- ----- $22.1 $4.4 $11.2 ===== ==== ===== Research and development $49.7 $53.1 $56.2 ===== ===== ===== Advertising expense $8.6 $8.0 $9.2 ==== ==== ====
34 and 35 Eleven-Year Financial Summary General Signal Corporation and Consolidated Subsidiaries
Year Ended December 31, (Dollars in millions, except per-share data) 1994 1993 1992 1991 1990 1989 Summary of Operations Net sales $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.3 $1,522.4 Cost of sales 1,109.5 959.0 1,070.2 1,015.7 1,061.8 1,075.7 Selling, general and administrative expenses 292.3 259.3 287.7 282.7 304.9 326.7 Disposition of businesses and special items (46.2) (19.8) 85.6 - 83.3 (8.7) ----- ----- ---- ---- ---- Total operating costs and expenses 1,355.6 1,198.5 1,443.5 1,298.4 1,450.0 1,393.7 ------- ------- ------- ------- ------- ------- Operating earnings 172.1 155.7 34.3 125.7 47.3 128.7 Interest expense, net (11.8) (16.6) (24.8) (28.3) (31.8) (38.7) ----- ----- ----- ----- ----- ----- Earnings from continuing operations before income taxes 160.3 139.1 9.5 97.4 15.5 90.0 Income taxes 56.2 41.0 3.2 28.2 7.3 23.4 ---- ---- --- ---- --- ---- Earnings from continuing operations 104.1 98.1 6.3 69.2 8.2 66.6 Earnings (loss) from discontinued operations, net of income taxes 2.4 (31.5) 6.1 (5.2) (26.9) 11.9 Loss on disposal of discontinued operations, net of income taxes (25.8) - - (9.8) (14.2) - ----- ---- ----- Earnings (loss) before extraordinary charges and cumulative effect of accounting changes 80.7 66.6 12.4 54.2 (32.9) 78.5 Extraordinary charges - (6.6) (0.3) - - - Cumulative effect of accounting changes - (25.3) (92.4) - - - ----- ----- Net earnings (loss) $80.7 $34.7 $(80.3) $54.2 $(32.9) $78.5 ===== ===== ====== ===== ====== ===== Per-share Data Earnings (loss) per share of common stock Continuing operations $2.20 $2.17 $0.15 $1.80 $0.21 $1.75 Discontinued operations (0.49) (0.70) 0.15 (0.40) (1.07) 0.31 Extraordinary charges - (0.14) (0.01) - - - Cumulative effect of accounting changes - (0.56) (2.21) - - - ----- ----- Net earnings (loss) $1.71 $0.77 $(1.92) $1.40 $(0.86) $2.06 ===== ===== ====== ===== ====== ===== Cash dividends per share 0.90 0.90 0.90 0.90 0.90 0.90 Book value per share 11.64 11.09 8.90 12.32 11.69 13.25 ===== ===== ==== ===== ===== ===== Summary of Financial Position Working capital 360.1 268.8 347.8 243.9 310.6 328.8 Property, plant and equipment 280.5 263.4 246.9 263.7 283.0 325.1 Total assets 1,342.6 1,224.9 1,258.4 1,180.2 1,294.6 1,324.3 Total long-term liabilities 437.6 373.9 537.7 345.7 440.8 373.1 Shareholders' equity 547.9 525.2 374.8 476.4 450.3 506.1 ===== ===== ===== ===== ===== ===== Financial Ratios Working capital to sales 13.5% 17.9% 16.3% 15.8% 20.2% 20.1% Selling, general and administrative expenses to sales 19.1% 19.1% 19.5% 19.9% 20.4% 21.5% Operating margin 11.3% 11.5% 2.3% 8.8% 3.2% 8.5% After-tax return on net sales 6.8% 7.2% 0.4% 4.9% 0.5% 4.4% Return on average shareholders' equity from continuing operations 19.4% 21.8% 1.5% 14.9% 1.7% 13.8% Current ratio 2.0 1.8 2.0 1.7 1.8 1.7 Long-term debt to capitalization 32.9% 26.7% 49.5% 37.8% 46.9% 39.6% ==== ==== ==== ==== ==== ==== Supplemental Information Capital expenditures 74.8 55.1 49.9 48.1 68.8 62.0 Depreciation and amortization of fixed assets 41.7 35.4 40.6 42.1 44.5 44.7 Research and development 49.7 53.1 56.2 87.3 93.4 92.8 Common stock price range: High 38 37 7/8 32 5/8 26 7/8 29 5/8 28 7/8 Low 30 1/8 30 25 7/8 17 5/8 15 5/8 22 7/8 Price-earnings ratio range - continuing operations 17.3-13.7 17.5-13.8 21.1-16.8(1) 14.9-9.8 21.7-11.5(1) 16.5-13.1(1) Average common shares outstanding 47.3 45.2 41.8 38.6 38.4 38.1 Employees 12.2 11.2 12.1 12.6 11.6 16.9 ==== ==== ==== ==== ==== ==== (1) Excludes impact of after-tax charges related to dispositions of businesses.
Year Ended December 31, (Dollars in millions, except per-share data) 1988 1987 1986 1985 1984 ---- ---- ---- ---- ---- Summary of Operations Net sales $1,397.7 $1,249.2 $1,210.2 $1,407.0 $1,398.7 Cost of sales 983.6 885.0 846.1 996.7 951.4 Selling, general and administrative expenses 335.8 276.0 263.2 289.1 289.3 Disposition of businesses and special items 24.1 - - 72.0 - ---- ---- Total operating costs and expenses 1,343.5 1,161.0 1,109.3 1,357.8 1,240.7 ------- ------- ------- ------- ------- Operating earnings 54.2 88.2 100.9 49.2 158.0 Interest expense, net 1.9 1.7 (2.3) (1.4) 3.7 --- --- ---- ---- --- Earnings from continuing operations before income taxes 56.1 89.9 98.6 47.8 161.7 Income taxes 25.9 25.5 36.0 18.4 68.6 ---- ---- ---- ---- ---- Earnings from continuing operations 30.2 64.4 62.6 29.4 93.1 Earnings (loss) from discontinued operations, net of income taxes (5.0) 5.1 12.0 19.9 15.4 Loss on disposal of discontinued operations, net of income taxes - - - - - Earnings (loss) before extraordinary charges and cumulative effect of accounting changes 25.2 69.5 74.6 49.3 108.5 Extraordinary charges - - - - - Cumulative effect of accounting changes - - - - - Net earnings (loss) $25.2 $69.5 $74.6 $49.3 $108.5 ===== ===== ===== ===== ====== Per-share Data Earnings (loss) per share of common stock Continuing operations $0.55 $1.14 $1.09 $0.51 $1.63 Discontinued operations (0.09) 0.09 0.21 0.35 0.27 Extraordinary charges - - - - - Cumulative effect of accounting changes - - - - - Net earnings (loss) $0.46 $1.23 $1.30 $0.86 1.90 ===== ===== ===== ===== ==== Cash dividends per share 0.90 0.90 0.90 0.90 0.86 Book value per share 12.09 16.51 16.16 15.73 15.76 ===== ===== ===== ===== ===== Summary of Financial Position Working capital 496.3 540.8 536.3 520.6 571.2 Property, plant and equipment 312.5 310.6 345.6 361.5 344.9 Total assets 1,396.6 1,397.4 1,458.1 1,483.2 1,438.4 Total long-term liabilities 539.9 163.3 179.8 172.9 149.7 Shareholders' equity 461.0 907.2 927.4 904.0 901.7 ===== ===== ===== ===== ===== Financial Ratios Working capital to sales 29.7% 36.7% 40.7% 34.8% 37.7% Selling, general and administrative expenses to sales 24.0% 22.1% 21.7% 20.6% 20.7% Operating margin 3.9% 7.1% 8.3% 3.5% 11.3% After-tax return on net sales 2.2% 5.1% 5.2% 2.1% 6.7% Return on average shareholders' equity from continuing operations 4.4% 7.0% 6.8% 3.3% 10.7% Current ratio 2.3 2.7 2.5 2.3 2.5 Long-term debt to capitalization 51.6% 10.9% 11.8% 12.1% 9.7% ==== ==== ==== ==== === Supplemental Information Capital expenditures 38.8 34.0 45.7 68.1 88.7 Depreciation and amortization of fixed assets 42.1 42.4 41.4 37.6 32.4 Research and development 93.7 84.1 74.4 79.4 68.1 Common stock price range: High 28 1/8 30 5/8 27 1/8 26 7/8 27 Low 20 16 5/8 19 5/8 18 1/2 19 3/4 Price-earnings ratio range - continuing operations 36.1-25.7(1) 26.9-14.6 24.9-18.0 20.9-14.4(1) 16.6-12.1 Average common shares outstanding 55.4 56.5 57.5 57.4 57.1 Employees 16.6 16.6 17.5 19.3 21.0 ==== ==== ==== ==== ==== (1) Excludes impact of after-tax charges related to dispositions of businesses.
36 Directors and Officers Directors Ralph E. Bailey 2,3,5 Chairman and Chief Executive Officer American Bailey Corporation and Chairman, United Meridian Corporation, Chairman, Committee on Directors Van C. Campbell 1,4 Vice Chairman - Finance and Administration Corning Incorporated Edmund M. Carpenter 2 Chairman and Chief Executive Officer Ronald E. Ferguson 2,3,5 Chairman, President and Chief Executive Officer General Re Corporation, Chairman, Personnel & Compensation Committee John P. Horgan 2,3,4 Private Investor Chairman, Employee Benefits Committee C. Robert Kidder 1,4 Chairman and Chief Executive Officer Borden, Inc. Richard J. Kogan 1,3 President and Chief Operating Officer Schering-Plough Corporation Michael D. Lockhart President and Chief Operating Officer Nathan R. Owen 2,4 Retired Chairman and Chief Executive Officer, General Signal Corporation Chairman, Executive Committee Roland W. Schmitt 4,5 President Emeritus and Retired President, Rensselaer Polytechnic Institute; Retired Senior Vice President Science & Technology, General Electric Company John R. Selby 1,2,3 Retired Chairman and Chief Executive Officer SPS Technologies, Inc. Chairman, Audit Committee Director Emeritus Reginald H. Jones Retired Chairman and Chief Executive Officer, General Electric Company Officers Edmund M. Carpenter Chairman and Chief Executive Officer Michael D. Lockhart President and Chief Operating Officer Terence D. Martin Executive Vice President and Chief Financial Officer Joel S. Friedman Senior Vice President - Operations George Falconer Vice President - Human Resources Nino J. Fernandez Vice President - Investor Relations Philip A. Goodrich Vice President - Corporate Development Darryl A. Littleton Vice President - Manufacturing Terry J. Mortimer Vice President and Controller Edgar J. Smith, Jr. Vice President, General Counsel, and Secretary Thomas E. Taylor Vice President - Taxes Julian B. Twombly Vice President and Treasurer Operating Unit Presidents Process Controls Sector Cleive C. Dumas General Signal Pump Group Thomas W. Frey DeZurik Horst P. Engelbrecht Lightnin Daniel B. Dawley Revco/Lindberg Electrical Controls Sector James J. Beville Dielectric Communications Timothy J. Mellen GS Building Systems Corporation Michael R. Jacqmin GS Electric Michael J. Cheshire GS Electrical Power Systems Group Industrial Technology Sector Robert Coackley GS Telecom Group James A. Pacelli GFI Genfare Henry G. Anzuini Metal Forge 1Member of Audit Committee 2Member of Executive Committee 3Member of Personnel and Compensation Committee 4Member of Employee Benefits Committee 5Member of Committee on Directors Shareholder Information Annual Meeting The 1995 annual meeting of shareholders will be held at 10:00 a.m. on Thursday, April 20, 1995 at General Signal Headquarters, One High Ridge Park, Stamford, Connecticut. Form 10-K The company's 1994 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, will be available after April 1, 1995. A copy of this report may be obtained by writing to the Secretary of the Corporation. Transfer Agent The Bank of New York Shareholder Relations Department 11E P.O. Box 11258 Church Street Station New York, New York 10286 (800) 524-4458 Independent Auditors Ernst & Young, LLP 1111 Summer Street Stamford, Connecticut 06905 Listings General Signal Corporation common stock is listed and traded on the New York and Pacific Stock Exchanges under the symbol GSX. Dividend Reinvestment Plan A fee-paid Automatic Dividend Reinvestment and Cash Payment Plan is available to shareholders of record. Through voluntary participation, shareholders may purchase additional shares of the company's stock by reinvesting their dividends or by making cash payments directly to The Bank of New York. Under the latter option, cash payments from $25 to $10,000 per quarter may be made whenever a shareholder so desires. Additional information about this plan is available from: The Bank of New York Dividend Reinvestment Department P.O. Box 11002 Church Street Station New York, New York 10286-1002 An Equal Opportunity Employer Printed in the U.S.A. Featured photography, sector introductory pages Page 6 Process Controls: Regenerative turbine pumps from General Signal Pump Group. Page 9 Electrical Controls: Emergency lighting and exit signs from GS Building Systems Corporation. Page 12 Industrial Technology: Cirrus auto assembly (courtesy Chrysler Motors) from Metal Forge. Design: Pappas MacDonnell, Inc. Southport, Connecticut Appendix A Description of Graphic and Image Material Financial Highlights Section: Bar Graphs - Two Dimensional Graph #1 - A bar graph showing the company's net sales for the two years ended December 31, 1994 and 1993. The plotted values are: 1994 - $1,527.7 million; 1993 - 1,354.2 million. The caption below this graph reads: "Net Sales; Dollars in millions." Graph #2 - Bar graph which plots the company's earnings for the years ended December 31, 1994 and 1993. The amounts are: 1994 - $104.1 million; 1993 - $86.4 million. The caption below this graph reads: "Earnings (1); Dollars in millions." The "(1)" footnote indicates: "Excludes charges and credits related to consolidation of operations, asset valuations, semiconductor equipment operations, adoption of accounting standards, and other charges related to both years. See page 14 of Management's Discussion and Analysis for further details." Graph #3 - Bar graph plotting the company's earnings per share for the years ended December 31, 1994 and 1993. The two plotted values shown are: 1994 - $2.20; 1993 - $1.91. The text below the graph reads: "Earnings Per Share (1); Dollars." The '(1)" footnote indicates: "Excludes charges and credits related to consolidation of operations, asset valuations, semiconductor equipment operations, adoption of accounting standards, and other charges related to both years. See page 14 of Management's Discussion and Analysis for further details." Graph #4 - This bar graph plots the company's return on shareholders' equity percentage for the years ended December 31, 1994 and 1993. The shown amounts are: 1994 - 19.4%; 1993 - 16.9%. Below this graph is a caption that states: "Return on Equity (1); Percent." The '(1)" footnote indicates: "Excludes charges and credits related to consolidation of operations, asset valuations, semiconductor equipment operations, adoption of accounting standards, and other charges related to both years. See page 14 of Management's Discussion and Analysis for further details." At A Glance Section: Pie Chart of Net Sales Shown is a pie chart which plots 1994 net sales of the company's three product sectors. The caption below the chart states: "Net Sales; Dollars in millions." The legend lists: $606 Process Controls; $619 Electrical Controls; $303 Industrial Technology. Pie Chart of Operating Earnings Shown is a pie chart which plots 1994 operating earnings of the company's three product sectors. Text under the chart reads: "Operating Earnings (1); Dollars in millions." The "(1)" footnote indicates "Excludes one-time items (see page 31)." The chart's legend shows: $79 Process Controls; $50 Electrical Controls; $57 Industrial Technology. Process Controls Section: Photos Photo #1 - On the introductory page of this section is a full page photograph of regenerative turbine pumps from General Signal Pump Group. Photo #2 - Photograph of a vertical in-line fire pump. The text under the picture reads: "General Signal Pump Group expanded its presence in the fire protection market, introducing vertical in-line fire pumps for smaller high-rise buildings. The unit's acquisition of Fairbanks Morse also broadened its fire pump offerings for the industrial market." Photo #3 - Photograph of three laboratory refrigerators. The text to the left of the photograph reads: "Revco/Lindberg's new line of environmentally friendly refrigerators free of chlorofluorocarbons was introduced in advance of 1996 federal air quality deadlines." Photo #4 - Photograph of a DeZurik valve. The text below the photograph states: "DeZurik increased its share of the municipal market, delivering AWWA butterfly and eccentric plug valves for water and wastewater treatment applications." Bar Graphs - Two Dimensional Graph #1 - A bar graph which plots net sales for the Process Controls sector for the three years ended December 31, 1994, 1993, and 1992. The values that are shown are as follows: 1994 - $606 million; 1993 - $546 million; 1992 - $549 million. The caption under the graph reads: "Process Controls Net Sales; Dollars in millions." Graph #2 - This bar graph plots the operating earnings for the Process Controls sector for the three years ended December 31, 1994, 1993, and 1992. The values that are shown are as follows: 1994 - $79 million; 1993 - $67 million; 1992 - $61 million. The text below the graph states: "Process Controls Operating Earnings (1); Dollars in millions." The "(1)" footnote indicates: "Excludes one-time items (see page 31)." Electrical Controls Section: Photos Photo #1 - Shown on the introductory page of this section is a full page photograph of emergency lighting and exit signs from GS Building Systems Corporation. Photo #2 - Shown is a photograph of a smoke detector attached to a ceiling with smoke below it. The caption above the picture states: "GS Building Systems Corporation's revolutionary new line of smoke detectors adapt to their environment to distinguish between latent and burning fires." Photo #3 - A photograph of various electrical fittings that are part of the company's GS Electrical Power Systems Group. The caption to the right of the photo reads: "Bolt-on acquisitions completed in 1994 gave GS Electrical Power Systems Group's product line the broadest array of fittings in the electrical industry." Photo #4 - A photograph of two power supply systems. Sticking out from under this photo is a cover page of Compumagazine. The text to the right of the picture states: "GS Electrical Power Systems Group's new series 700 on-line uninterruptible power supply system gave the unit access to new global markets, including Argentina, where the product was the top choice of Compumagazine, the country's leading computer magazine." Bar Graphs - Two Dimensional Graph #1 - A bar graph showing net sales for the Electrical Controls sector for the three years ended December 31, 1994, 1993 and 1992. The values plotted are as follows: 1994 - $619 million; 1993 - $547 million; 1992 - $568 million. Below the graph reads: "Electrical Controls Net Sales; Dollars in millions." Graph #2 - A bar graph which plots the Electrical Controls sector's operating earnings for the three years ended December 31, 1994, 1993, and 1992. The amounts plotted are as follows: 1994 - $50 million; 1993 - $40 million; 1992 - $43 million. The description of the graph states: "Electrical Controls Operating Earnings (1); Dollars in millions." The "(1)" footnote indicates: "Excludes one-time items (see page 31)." Industrial Technology Section: Photos Photo #1 - A full page picture of a Cirrus auto assembly is shown on the introductory page of this section. The picture's description (printed on the inside of the back cover) is as follows: "Industrial Technology: Cirrus auto assembly (courtesy Chrysler Motors) from Metal Forge." Photo #2 - Shown is a GS Telecom Group switch. The caption below the photograph states: "The new 2700 LAN/WAN switch from GS Telecom Group gave the unit a leading position in the growing market for systems that can manage both local and wide-area networks." Photo #3 - A photograph of a stamp vending machine. The text below this picture reads: "Like an automated teller for the post office, GFI Genfare's new stamp vending machine will soon dispense stamps and make change for customers at thousands of U.S. Postal Service facilities throughout the country." Bar Graphs - Two Dimensional Graph #1 - The description of this graph reads: "Industrial Technology Net Sales; Dollars in millions." Plotted are the net sales of the Industrial Technology sector for the three years ended December 31, 1994, 1993, and 1992. The values are as follows: 1994 - $303 million; 1993 - $261 million; 1992 - $227 million. Graph #2 - The caption under this bar graph states: "Industrial Technology Operating Earnings (1); Dollars in millions." The "(1)" footnote indicates: "Excludes one-time items (see page 31)." This graph plots the Industrial Technology sector's operating earnings for the three years ended December 31, 1994, 1993, and 1992. These plotted values are as follows: 1994 - $57 million; 1993 - $45 million; 1992 - $33 million. Management's Discussion and Analysis of Financial Condition and Results of Operations Section: Bar Graphs - Two Dimensional Graph #1 - A bar graph which plots the company's net sales for the three years ended December 31, 1994, 1993, and 1992. The plotted amounts are: 1994 - $1,528 million; 1993 - $1,354 million; 1992 - $1,343 million. The caption under this graph reads: "Net Sales; Dollars in millions; Excludes divested operations." Graph #2 - A bar graph plotting the company's gross profit for the year ended December 31, 1994, 1993, and 1992. The caption below this graph reads: "Gross Profit; Dollars in millions; Excludes divested operations and one-time items." The amounts plotted are as follows: 1994 - $446 million; 1993 - $400 million; 1992 - $391 million. Graph #3 - A bar graph which shows net interest expense of the company for the years ended December 31, 1994, 1993, and 1992. Under this graph is text which reads: "Net Interest Expense; Dollars in millions." The three values plotted are: 1994 - $12 million; 1993 - $17 million; 1992 - $25 million. Graph #4 - A bar graph which plots the company's earnings from its continuing operations for the years ended December 31, 1994, 1993, and 1992. The caption below the graph reads: "Earnings from Continuing Operations; Dollars in millions; Adjusted to exclude one-time items." The three shown amounts are: 1994 - $104 million; 1993 - $86 million; 1992 - $70 million. Graph #5 - A bar graph which plots working capital as of December 31, 1994, 1993, and 1992. These values are as follows: 1994 - $360 million; 1993 - $269 million; 1992 - $348 million. The caption under the graph states: "Working Capital; Dollars in millions." Graph #6 - A bar graph plotting capital expenditures and research and development expense. Capital expenditures (on the top section of each of three bars) plotted for the years ended December 31, 1994, 1993, and 1992 are $67 million, $53 million, and $48 million, respectively. Research and development expense (on the bottom section of each bar) for the years ended December 31, 1994, 1993, and 1992 are $50 million, $53 million, and $56 million, respectively. The caption below this graph reads: "Capital Expenditures and R&D; Dollars in millions; Excludes divested operations." Graph #7 - A bar graph plotting total capitalization and the ratio of long-term debt to capitalization. Each of three bars shows both items - total capitalization on the top and the ratio below. The total capitalization values as of December 31, 1994, 1993, and 1992 are $817.0 million, $716.6 million, and $742.5 million, respectively. Ratio amounts are 32.9%, 26.7%, and 49.5% as of December 31, 1994, 1993, and 1992. Below the graph is a caption which reads: "Capitalization; Dollars in millions." -----END PRIVACY-ENHANCED MESSAGE-----