-----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, XOqQ/Dlp1iWorwSE2fg8SPfT5702lccw3eZD1vbFkX81obiVjg+zkDEK9F2bYquj xry7dH2166PtNMQPO5gIDw== 0000040834-95-000012.txt : 19950627 0000040834-95-000012.hdr.sgml : 19950627 ACCESSION NUMBER: 0000040834-95-000012 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19950626 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 95549201 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 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 GENERAL SIGNAL CORPORATION FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report June 26, 1995 (Date of earliest event reported) GENERAL SIGNAL CORPORATION (exact name of registrant as specified in its charter) NEW YORK (State or other jurisdiction of incorporation) 1-996 16-0445660 (Commission File Number) (IRS Employer Identification Number) P.O. Box 10010 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904 (Address of principal executive offices) (Zip Code) (203) 329-4100 (Registrant's telephone number, including area code) Item 2. Acquisition of Assets On June 14, 1995, G.S. Newco, Inc.("G.S. Newco") a Delaware corporation and wholly owned subsidiary of General Signal Corporation ("GSX"), a New York corporation, accepted for payment all tendered shares of Common Stock (the "Shares"), par value $.01 per share, of Best Power Technology, Incorporated ("Best"), a Delaware corporation, pursuant to GSX's May 16, 1995 tender offer of $21 per share (the "Offer"). As a result of purchasing all Shares tendered in the Offer, G. S. Newco owned 9,325,055 Shares, representing approximately 97% of the outstanding common stock of Best. Pursuant to the Agreement and Plan of Merger, dated May 10, 1995, among GSX, G.S. Newco and Best, GSX caused G.S. Newco to merge with and into Best (the "Merger"). Pursuant to Section 253 of the General Corporation Law of the State of Delevware, the merger was consummated without a vote of Best stockholders. Following consummation of the Merger, Best continues as the surviving corporation and has become a wholly owned subsidiary of GSX. On June 14, 1995 (the effective date of the Merger), each Share issued and outstanding immediately prior to June 14 (other than Shares held in the treasury of Best or owned by G.S. Newco, GSX or any direct or indirect wholly owned subsidiary of GSX, and other than Shares held by stockholders who shall have demanded and perfected appraisal rights under the General Corporation Law of the State of Delaware) was cancelled and converted automatically into the right to receive $21 in cash, without interest. The aggregate purchase price of the Shares purchased and to be purchased pursuant to the Offer and the Merger is approximately $195 million. The amount of such purchase price has been determined by multiplying the number of Shares issued and outstanding as of June 14, 1995 by $21, the cash consideration paid or to be paid per Share pursuant to the Offer and Merger. The funds for such purchase price were obtained by G.S. Newco from GSX. GSX obtained the funds through issuance of commercial paper. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of businesses acquired The following report and audited financial statements of Best and its subsidiaries are attached hereto as Appendix A: (i) Report of Independent Accountants dated February 3, 1995; (ii) Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992; (iii) Consolidated Balance Sheets as of December 31, 1994 and 1993; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992; (v) Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992; and (vi) Notes to Consolidated Financial Statements. The following unaudited financial statements of Best and its subsidiaries are attached hereto as Appendix B: (i) Condensed Consolidated Statements of Income (unaudited) for the three months ended March 31, 1995 and March 31, 1994; (ii) Condensed Consolidated Balance Sheets (unaudited) as of March 31, 1995 and December 31, 1994; (iii) Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 1995 and March 31, 1994; and (iv) Notes to Condensed Consolidated Financial Statements (unaudited). (b) Pro forma financial information. The following unaudited pro forma financial information of GSX and Best is attached hereto as Appendix C: (i) Introductory Note; (ii) Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the twelve months ended December 31, 1994 and for the three months ended March 31, 1995; and (iii) Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1995; (iv) Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. (c) Exhibits 2a. Agreement and Plan of Merger, dated as of May 10, 1995, by and among GSX, G.S. Newco and Best is incorporated herein by reference to Exhibit 1 to Amendment No. 9 to the Tender Offer Statement on Schedule 14D-9 filed on May 16, 1995 by GSX and G.S. Newco with respect to the Offer. 23. Consent of Ernst & Young LLP, independent accountants. Appendix A Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Stockholders Best Power Technology, Incorporated We have audited the accompanying consolidated balance sheets of Best Power Technology, Incorporated as of December 31, 1993 and 1994, and the related consolidated statements of income, stockholders' 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 consolidated financial position of Best Power Technology, Incorporated at December 31, 1993 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. Ernst & Young LLP Milwaukee, Wisconsin February 3, 1995 Best Power Technology, Inc. Consolidated Statements of Income Year ended December 31 1992 1993 1994 Net sales $118,795,517 $132,637,845 $149,440,737 Cost of goods sold 65,041,135 74,089,107 86,415,305 Gross profit 53,754,382 58,548,738 63,025,432 Operating expenses: Selling and marketing 23,317,857 25,482,531 26,361,484 Administrative 8,695,445 7,539,048 10,920,708 Research and development 6,464,847 7,273,054 8,582,201 Incentive compensation - 1,287,000 - 38,478,149 41,581,633 45,864,393 Income from operations 15,276,233 16,967,105 17,161,039 Other income (expense): Interest income 433,171 604,914 665,221 Interest expense (548,170) (331,860) (197,263) Foreign currency gain (loss) (639,661) (7,734) 198,177 Miscellaneous (46,554) (9,144) 117,030 Minority interest - - 336,042 (801,214) 256,176 1,119,207 Income before income taxes 14,475,019 17,223,281 18,280,246 Income taxes 1,292,409 3,983,025 7,175,000 Net income $ 13,182,610 $ 13,240,256 $ 11,105,246 Net income per common share (Note 1) $ - $ - $ 1.15 PRO FORMA DATA (unaudited) (Note 2): Income before income taxes $ 14,475,019 $ 17,223,281 $ - Income taxes 5,267,644 5,459,928 - Net income $ 9,207,375 $ 11,763,353 $ - Net income per common share (Note 1) $ 1.15 $ 1.36 $ Weighted average number of common shares 8,011,671 8,664,124 9,620,580 See accompanying notes.
Best Power Technology, Inc. Consolidated Balance Sheets December 31 1993 1994 ASSETS Current assets: Cash and cash equivalents $19,100,693 $12,525,006 Accounts receivable - trade, less allowance of $224,000 in 1993 and $450,000 in 1994 16,545,393 22,055,672 Other receivables 187,128 814,630 Inventories 16,292,302 24,902,474 Prepaid expenses and other assets 1,483,868 845,082 Deferred tax benefits 2,243,790 3,729,592 Total current assets 55,853,174 64,872,456 Property, plant and equipment, net 13,780,165 20,656,877 Intangible assets, net of accumulated amortization of $19,000 in 1993 and $55,000 in 1994 231,858 3,912,403 Long-term portion of deferred tax benefits 268,019 - Total assets $70,133,216 $89,441,736 December 31 1993 1994 Liabilities and stockholders equity Current liabilities: Accounts payable $8,049,744 $ 7,868,813 Advance payments - customer service contracts 5,626,007 6,471,549 Income taxes payable 515,679 465,538 Accrued liabilities 3,727,376 6,603,997 Current maturities of long-term debt and capital lease obligations 19,957 2,884,231 Total current liabilities 17,938,763 24,294,128 Advance payments - customer service contracts 4,022,539 3,807,824 Long-term debt and capital lease obligations 45,699 2,276,804 Deferred tax liability 20,197 112,274 Total liabilities 22,027,198 30,491,030 Minority interest - 1,450,158 Commitments and contingencies (Notes 6, 7 and 8) Stockholders equity: Preferred stock - - Common stock 96,579 96,707 Additional paid-in capital 38,497,117 38,658,307 Retained earnings 9,732,623 20,837,869 Cumulative foreign currency translation adjustments (204,585) (23,585) Notes receivable from stockholders (15,716) - Less treasury shares (150,000-1994), at cost - (2,068,750) Total stockholders equity 48,106,018 57,500,548 Total liabilities and stockholders equity $70,133,216 $89,441,736 See accompanying notes.
Best Power Technology, Inc. Consolidated Statements of Cash Flows Year ended December 31 1992 1993 1994 OPERATING ACTIVITIES Net income $13,182,610 $ 13,240,256 $ 11,105,246 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,839,939 2,374,327 2,059,054 Deferred tax benefit (1,509,324) (679,239) (1,104,490) Minority interest - - (336,042) Loss (gain) on disposal of equipment 50,094 (39,608) - Incentive compensation - 1,287,000 - Changes in operating assets and liabilities, net of effects of acquisitions: Receivables - trade (4,353,806) (2,846,093) (5,200,161) Other receivables (286,729) 838,475 (580,517) Inventories (3,005,796) (1,141,009) (7,767,320) Prepaid expenses and other assets (127,128) (1,286,300) 451,570 Accounts payable 10,926 952,224 (180,931) Advance payments - customer service contracts 4,761,167 2,828,840 630,827 Income taxes payable (422,114) 116,447 (50,141) Accrued liabilities 2,599,492 (1,822,924) 2,855,405 Total adjustments (443,279) 582,140 (9,222,746) Net cash provided by operating activities 12,739,331 13,822,396 1,882,500 INVESTING ACTIVITIES Capital expenditures (2,161,132) (3,066,470) (5,543,348) Proceeds from disposal of equipment 67,762 744,447 - Cost of acquisitions, net of cash acquired - - (7,904,701) Net cash used in investing activities (2,093,370) (2,322,023) (13,448,049) FINANCING ACTIVITIES Proceeds from issuance of common stock, net of stockholder notes 303,803 20,951,937 161,318 Acquisition of treasury stock - - (2,068,750) Payments on notes receivable from stockholders 63,111 461,184 15,716 Payments on notes payable - bank, net (6,000,000) - - Proceeds from (payments on) debt and capital lease obligations (196,481) (472,260) 805,601 Proceeds from BEST ASIA debt - - 4,289,777 Distributions paid (4,234,734) (14,966,377) - Contributions by minority interest in subsidiary - - 1,786,200 Net cash provided by (used in) financing activities (10,064,301) 5,974,484 4,989,862 Net increase (decrease) in cash and cash equivalents 581,660 17,474,857 (6,575,687) Cash and cash equivalents at beginning of year 1,044,176 1,625,836 19,100,693 Cash and cash equivalents at end of year $ 1,625,836 $ 19,100,693 $ 12,525,006 See accompanying notes.
Best Power Technology, Inc. Consolidated Statements of Stockholders' Equity Common Stock, $.01 Par Cumulative Value, Authorized Foreign Notes 25 Million Shares Additional Currency Receivable Total Outstanding Paid-in Retained Translation from Treasury Stockholders Shares Amount Capital Earnings Adjustments Stockholders Stock Equity Balance January 1, 1992 7,760,589 $77,606 $ 3,253,673 $ 15,018,429 $(35,149) $(327,895) $ $17,986,664 Net income 13,182,610 13,182,610 Foreign currency translation adjustments (111,117) (111,117) Issuance of stock 198,655 1,986 447,778 (145,961) 303,803 Payments on notes receivable from stockholders 63,111 63,111 Distributions (6,476,118) (6,476,118) Balance December 31, 1992 7,959,244 79,592 3,701,451 21,724,921 (146,266) (410,745) 24,948,953 Net income 13,240,256 13,240,256 Foreign currency translation adjustments (58,319) (58,319) Shares sold to public, net of offering costs 1,590,000 15,900 20,768,637 20,784,537 Shares issued through exercise of warrants 108,630 1,087 232,468 (66,155) 167,400 Incentive compensation related to warrants 1,287,000 1,287,000 Payments on notes receiv- able from stockholders 461,184 461,184 Distributions (12,724,993) (12,724,993) Reclassify undistributed S Corporation earnings 12,507,561 (12,507,561) Balance December 31, 1993 9,657,874 96,579 38,497,117 9,732,623 (204,585) (15,716) 48,106,018 Net income 11,105,246 11,105,246 Foreign currency translation adjustments 181,000 181,000 Issuance of stock 12,805 128 161,190 161,318 Repurchase of common shares for treasury (150,000) (2,068,750) (2,068,750) Payments on notes receiv- able from stockholders 15,716 15,716 Balance December 31, 1994 9,520,679 96,707 $ 38,658,307 $20,837,869 $(23,585) $ $(2,068,750)$57,500,548 See accompanying notes. Best Power Technology, Inc.
Notes to Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of Best Power Technology, Incorporated (Technology or the Company) and its wholly and majority owned foreign subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation. Minority interest represents the minority stockholders proportionate share of the equity (balance sheet) and the net loss (income statement) of the Company s BEST ASIA joint venture (see Note 3). On July 1, 1993, the Company merged with Best Power Technology Sales Corporation (Sales), which had substantially the same stockholder ownership, through the issuance of 958,814 common shares of the Company in exchange for all of the common shares outstanding of Sales. For financial reporting purposes, the merger has been considered an exchange of common shares between enterprises under common control. Accordingly, the transaction was accounted for using historical amounts similar to the pooling-of-interests method of accounting for a business combination. Concurrent with the merger, the Company s status as an S Corporation was terminated as of June 30, 1993, and the Company became subject to tax at the corporate level beginning July 1, 1993. As a result, approximately $12.5 million of undistributed S Corporation earnings were reclassified from retained earnings to additional paid-in capital. Financial Instruments and Derivatives Following are disclosures of information about financial instruments with off-balance-sheet risk and concentrations of credit risk. Off-Balance-Sheet Risk The Company enters into forward foreign currency exchange contracts to hedge various subsidiary transactions (e.g., purchases from parent) denominated in other than local currencies. The purpose of the Company s foreign currency hedging activities is to protect these subsidiaries from the risk that the foreign subsidiaries payables resulting from U.S. dollar denominated purchases of products will be adversely affected by changes in exchange rates. At December 31, 1993 and 1994, open contracts required the delivery of foreign currencies (primarily French francs, deutsche marks and pounds sterling) in exchange for approximately $1.7 million and $4.3 million, respectively, at various exchange rates and dates through April 1994 and August 1995, respectively. Gains and losses on these forward contracts are deferred and recognized in the period of the related hedged transaction (generally within one year). At December 31, 1993 and 1994, the net deferred gain (loss) on these contracts totaled approximately $79 thousand and $(193) thousand, respectively. The Company is exposed to credit loss in the event of nonperformance by counterparties on foreign exchange contracts; however, the Company does not anticipate nonperformance by any of these counterparties. The amount of such exposure is generally the unrealized gains in such contracts. Concentrations of Credit Risk Financial instruments that potentially subject the Company to credit risk consist principally of trade receivables. The sales of products and services are to a wide range of end users, dealers and distributors. Periodic credit evaluations of customers financial condition are performed and generally collateral is not required, except for certain foreign sales on which letters of credit are obtained. Receivables from domestic customers generally are due in 30 days, whereas receivables from foreign subsidiary customers generally are due in 30 to 90 days. Cash and Cash Equivalents Cash and cash equivalents consist of short-term, highly liquid investments with original maturities of less than three months. Inventories Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Property, Plant and Equipment Property, plant and equipment is recorded at cost. Depreciation is provided using the straight-line and accelerated methods over the assets useful lives as follows: Years Land improvements 20 Buildings and improvements 40 Machinery and equipment 3 - 12 Leased equipment 5 - 6 Goodwill Goodwill recorded in connection with the BEST ASIA acquisitions is being amortized on a straight-line basis over 15 years. Revenue Recognition Revenue from product sales is recognized at the time of shipment. Certain of the Company s distributors have been granted varying return privileges on purchases of product. The effect of estimated future returns is provided for in the period that the related sales are recognized. As explained below, revenue and costs associated with separately priced customer service contracts are recognized in accordance with provisions of Financial Accounting Standards Board (FASB) Technical Bulletin No. 90-1, "Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts, such that (a) revenue is recognized either ratably over the contract period or, when there is sufficient historical evidence on costs, in proportion to the costs expected to be incurred over the contract period; (b) costs are expensed as incurred (incremental direct acquisition costs are not material); and (c) losses are recognized on contracts where the expected future costs exceed expected future revenue (no such contracts exist at December 31, 1992, 1993 or 1994). Advance Payments Customer Service Contracts Customer service contracts include customer protection plan contracts, site warranty plan contracts and extended warranty plan contracts. Receipts on contracts are recorded as advance payments at the inception of the contracts. The advance payments for customer protection plan contracts are recognized as revenue as services are performed (i.e., in proportion to the costs expected to be incurred in performing the service), while advance payments for site warranty plan contracts and extended warranty plans are recognized as revenue on a straight-line basis over the term of the contract. For all customer service contracts, costs are expensed as incurred. Advertising Costs The Company expenses advertising costs as incurred. Accrued Warranty The Company generally has a limited two-year warranty period applicable to its products. An accrual is provided for estimated future warranty costs based on the historical relationship of actual warranty claims to sales. Income Taxes For 1992, Sales accounted for income taxes under Statement of Financial Accounting Standards (SFAS) No. 96, "Accounting for Income Taxes." SFAS No. 109, "Accounting for Income Taxes," which superseded SFAS No. 96, was adopted prospectively in 1993 and had no impact on Sales financial position or results of operations. Technology was an S Corporation and, consequently, was not subject to corporate income taxes until the July 1, 1993 merger with Sales. Net Income Per Common Share Net income per common share for 1994 is calculated by dividing net income by the weighted average number of common shares outstanding. Stock options were either antidilutive or not materially dilutive. Historical net income per common share for 1992 and 1993 is not meaningful. Pro forma net income per common share for 1992 and 1993 is computed by dividing pro forma net income by the weighted-average number of common shares outstanding during each period retroactively adjusted for the 170-for-1 stock split on June 1, 1993, the merger of Technology and Sales on July 1, 1993, and the exercise of certain warrants during 1993. Stock options were not materially dilutive for 1992 or 1993. 2. PRO FORMA INCOME TAXES Effective January 1, 1987, Technology and its stockholders elected to be treated as an S Corporation under Subchapter S of the Internal Revenue Code and similar provisions under state income tax laws. Accordingly, Technology s taxable income was includable in the individual tax returns of the stockholders. Due to the merger of Technology and Sales on July 1, 1993, Technology s status as an S Corporation was terminated and, as a result, its income was subject to corporate income taxes from that date forward. The accompanying historical financial statements, therefore, do not include any provision or liability for income taxes of Technology for any period during which it was an S Corporation. For informational purposes, the accompanying consolidated statements of income and certain disclosures in Note 7 include a pro forma presentation for 1992 and 1993 that includes a provision for income taxes on the earnings of the Company for the periods during which it was an S Corporation. The pro forma adjustments (i.e., additional income tax expense) were calculated based on the income tax laws and rates in effect during those periods. Also, in connection with the termination of its S Corporation election, the Company recorded a nonrecurring income tax benefit - (related to the reinstatement of a net deferred tax asset) which increased net income and pro forma net income by $1.4 million, or $.16 per share, for the year ended December 31, 1993. 3. FORMATION OF ASIA JOINT VENTURE AND ACQUISITIONS During 1994, the Company entered into a joint venture agreement with six Taiwanese nationals and formed Best Power Technology Asia Limited (BEST ASIA). BEST ASIA is 51% owned by the Company and, therefore, has been consolidated. The Company also has an option to acquire up to an additional 9% of BEST ASIA common stock from the minority stockholders at book value on June 30, 1996. Under separate asset and stock purchase agreements, respectively, BEST ASIA acquired certain net assets of Joinsoon Electronics Manufacturers Co. Ltd. (Joinsoon), and the capital stock of Infomate Corporation (Infomate), two local Taiwanese companies, for approximately $7.9 million. Both Joinsoon and Infomate were previously controlled by BEST ASIA s minority stockholders, and Joinsoon manufactured certain products for the Company prior to its acquisition. The acquisitions were accounted for as purchases and, accordingly, the consolidated financial statements include the operations of such acquired entities since October 1, 1994, their effective acquisition dates. The purchase price was financed through the $3.6 million initial capitalization of BEST ASIA and a loan agreement with United World Chinese Bank. The acquisitions resulted in BEST ASIA recording approximately $3.3 million in goodwill, and had the following effect on cash (in thousands): Fair value of net assets acquired (net of cash received) $ 7,905 Fair value of liabilities assumed - Net effect on cash $ 7,905 The impact of the acquisitions is not material to the Company and, as a result, pro forma financial information relating thereto has not been presented. BEST ASIA also has an option to acquire Cotek International Limited (Cotek), a private Hong Kong company. 4. ADDITIONAL BALANCE SHEET INFORMATION The detail supporting certain balance sheet groupings is shown below: December 31 1993 1994 Inventories: Raw materials $ 8,612,402 $12,229,847 Work in process 185,024 498,782 Finished goods 7,494,876 12,173,845 $ 16,292,302 $ 24,902,474 Property, plant and equipment, net: Land and land improvements $ 1,175,310 $ 2,465,726 Buildings and improvements 8,816,253 11,501,999 Machinery and equipment 9,806,037 12,701,338 Leased equipment 464,168 330,092 Construction in progress 633,441 2,661,032 Total property, plant and equipment, at cost 20,895,209 29,660,187 Less accumulated depreciation (7,115,044) (9,003,310) $ 13,780,165 $ 20,656,877 Accrued liabilities: Payroll expense $ 2,405,903 $ 2,946,727 Payroll taxes and other withholdings 216,228 508,008 Taxes other than income and payroll 363,102 819,881 Warranty 600,000 1,000,000 Other expenses 142,143 1,329,381 $ 3,727,376 $ 6,603,997 5. STATEMENT OF CASH FLOWS Noncash transactions and supplemental cash flow information are as follows: Year ended December 31 1992 1993 1994 Profit distribution declared $ 2,241,384 $ - $ - Cash payments for: Interest 666,095 452,586 173,822 Income taxes 3,226,584 4,731,783 8,613,854 6. LINE OF CREDIT AND LONG-TERM DEBT In August 1993, the Company obtained a $15 million unsecured credit facility, which expires in August 1995. The facility provides the Company with an interest rate option of (a) the bank s prime rate or (b) the London InterBank Offering Rate (LIBOR) plus 1.35% fixed for 30, 60 or 90 days. The agreement provides for a commitment fee at an annual rate of 1/4 of 1% of the unused facility. The agreement also contains certain covenants including: maintenance of minimum tangible net worth, as defined; limitations on the issuance of additional debt, the sale of significant assets or stock of the Company, or a merger involving the Company; and maintenance of certain financial ratios. No amounts were outstanding under the facility at December 31, 1993 or 1994. However, the available borrowings under the facility have been reduced by a $3.7 million standby letter of credit issued by the lender on behalf of the Company as collateral for certain bank debt of BEST ASIA as described below.
Long-term debt and capital lease obligations consist of the following at December 31: 1993 1994 Note payable by BEST ASIA to local bank on October 3, 1995; interest payable monthly at prime plus .825%; secured by a U.S. standby letter of credit $ - $ 2,662,609 Mortgage note payable by BEST ASIA to local bank in 12 equal semi-annual installments beginning in October 1995 through April 2001; interest payable monthly at prime plus .825%; secured by land and building - 2,396,348 Other 65,656 102,078 65,656 5,161,035 Less current portion 19,957 2,884,231 Long-term debt and capital lease obligations, less current portion $ 45,699 $ 2,276,804
7. INCOME TAXES
Following is a summary of income before income taxes: Year ended December 31 1992 1993 1994 Domestic $13,227,058 $15,599,653 $19,056,651 Combined foreign subsidiary income 1,426,598 2,241,232 224,561 Elimination of intercompany profits (178,637) (617,604) (1,000,966) Consolidated income before income taxes $14,475,019 $17,223,281 $18,280,246
The provision for income taxes consists of the following: Pro Forma Historical (Unaudited see Note 2) 1992 1993 1994 1992 1993 Current: Federal $ 2,315,341 $ 3,428,294 $ 6,912,436 $ 5,964,060 $ 5,038,639 State 426,928 647,610 1,290,087 1,356,672 1,053,237 Foreign 59,464 586,360 76,967 59,464 586,360 2,801,733 4,662,264 8,279,490 7,380,196 6,678,236 Deferred: Federal (1,280,138) (558,075) (799,076) (1,761,840) (988,544) State (237,737) (110,546) (171,911) (359,263) (219,146) Foreign 8,551 (10,618) (133,503) 8,551 (10,618) (1,509,324) (679,239) (1,104,490) (2,112,552) (1,218,308) Total provision $ 1,292,409 $ 3,983,025 $ 7,175,000 $ 5,267,644 $ 5,459,928
Differences between the provision for income taxes at the U.S. statutory income tax rate and the provision in the accompanying consolidated statements of income are as follows:
Pro Forma Historical (Unaudited see Note 2) 1992 1993 1994 1992 1993 Provision at federal statutory rate $ 4,921,506 $6,028,150 $6,398,086 $4,921,506 $6,028,150 Increase (decrease) resulting from: S Corporation income taxable to stockholders (3,472,469) (1,269,070) Current benefit from foreign loss carryforwards (246,105) (148,376) (91,869) (246,105) (148,376) Foreign losses that do not provide current benefit 41,877 70 291,030 41,877 70 Foreign sales corporation benefit (148,410) (165,249) (152,062) (148,410) (165,249) State income taxes, net of federal benefit 127,373 540,090 726,814 661,817 747,923 Reinstatement of net deferred tax asset (1,399,385) (1,399,385) Effect of minority interest (117,615) Other, net 68,637 396,795 120,616 36,959 396,795 Provision for income taxes $1,292,409 $ 3,983,025 $7,175,000 $5,267,644 $5,459,928 Deferred tax assets and (liabilities) as of December 31, 1993 and 1994, are as follows:
1993 1994 Deferred tax liabilities: Tax over book depreciation and amortization $ (607,578) $ (953,983) Deferred tax assets: Advance payments customer service contracts 2,081,791 2,284,127 Nondeductible accruals various 1,017,399 2,145,581 Tax relief available on distribution of German subsidiary undistributed earnings 141,593 Foreign operating loss carryforwards 81,000 989,000 Total deferred tax assets 3,180,190 5,560,301 Valuation allowance for deferred tax assets (81,000) (989,000) Net deferred tax assets 3,099,190 4,571,301 Net deferred taxes $2,491,612 $3,617,318
Deferred taxes are presented on the accompanying consolidated balance sheet as of December 31, 1993 and 1994, as follows: 1993 1994 Current portion of deferred tax benefits $ 2,243,790 $ 3,729,592 Long-term portion of deferred tax benefits 268,019 Long-term deferred tax liability (20,197) (112,274) Net deferred taxes $ 2,491,612 $ 3,617,318
The deferred tax provision for 1992 resulted principally from temporary differences between accounting for financial statement purposes and accounting for tax purposes for revenue on customer service contracts (approximately $1.2 million) and for certain nondeductible accruals ($290 thousand). In connection with the adoption of SFAS No. 109 in 1993, a gross deferred tax asset has been established for the tax benefit of net operating loss carryforwards of certain foreign subsidiaries. In accordance with SFAS No. 109 s more likely than not provisions, a valuation allowance has been established to the full extent of such potential future benefits. The foreign net operating loss carryforwards of approximately $3.9 million as of December 31, 1994, are available to offset future taxable income of the subsidiaries. Loss carryforwards of $313 thousand, $763 thousand, $925 thousand, and the remaining $1.9 million will expire in 1995, 1996, 1997 and 1998 or later, respectively. Provisions are made for estimated U.S. and foreign income taxes (less available tax credits and deductions) that would be incurred on the remittance of the Company s share of foreign subsidiaries undistributed earnings, less those amounts deemed to be reinvested indefinitely. At December 31, 1993, deferred taxes had not been provided on approximately $1.2 million of undistributed foreign earnings. During 1994, the Company determined that its German subsidiary s undistributed earnings, which previously had been considered invested indefinitely, would eventually be distributed. That decision resulted in a net deferred tax benefit of $142 thousand as a result of the lower German statutory rate applicable to distributable earnings. As of December 31, 1994, undistributed earnings of foreign subsidiaries considered to be indefinitely reinvested are not significant. The Internal Revenue Service (IRS) currently is examining federal income tax returns of Technology and Sales for 1990 and 1991. The statute of limitations has expired for 1988 and 1989. Amounts of potential claims or settlements cannot be anticipated. In the case of Technology, the Company has entered into an agreement to indemnify its stockholders against additional taxes (including interest and penalties) arising from an audit of Technology s tax returns for any period during which it was an S Corporation. Resolution of potential settlements with the IRS resulting in additional liability for stockholders of Technology while filing as an S Corporation will result in additional distributions by Technology in accordance with the indemnification agreement. 8. LEASE COMMITMENTS AND RELATED-PARTY TRANSACTIONS The Company leases certain property and equipment, including offices, warehouse facilities and other equipment, under operating leases which expire over the next 2 to 13 years. Future minimum annual lease payments for those operating leases having initial or remaining noncancelable terms in excess of one year are: $349,453 1995; $218,294 1996; $174,367 1997; $82,675 1998; $82,675 1999; and $483,376 thereafter. Rent expense was $697,825, $500,605 and $607,272 in 1992, 1993 and 1994, respectively. In May 1994, the Company entered into an aircraft lease agreement and an aviation services agreement with two separate companies controlled by an officer/stockholder of the Company. Both agreements expire after one year (May 1995) and require a combined basic monthly rent/fee of $24 thousand. The aircraft lease also includes a usage fee of $.75 per statute mile and a hangar fee of $2 thousand per month. The aviation services agreement requires a fee of $100 per hour for each hour in excess of forty hours per pilot per week. During 1994, the Company expensed $552 thousand related to these agreements (and under informal agreements prior to May 1994), which included various aircraft repair and maintenance expenditures as well as pilot travel expenses. During 1992 and 1993, the Company expensed $144 thousand in each year of payments made to one of these companies for unlimited flight services. 9. STOCKHOLDERS EQUITY Preferred Stock The Company has authorized 10 million shares of preferred stock, par value $.01 per share, of which no shares are issued and outstanding. The Board of Directors is authorized to determine the voting, dividend, redemption and liquidation preferences and limitations pertaining to such shares which may have the effect of delaying, deferring or preventing a future takeover or change in control of the Company. Employee Stock Option Plan The 1993 Stock Option Plan (1993 Option Plan) provides for the granting of up to 1,000,000 stock options to certain key employees. Options may be granted to participants, which constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or nonstatutory stock options. The option price per share will be not less than 100% of the fair market value as of the date of the grant of the option (110% in the case of incentive stock options). Options granted under the 1993 Option Plan generally become exercisable within the fourth through tenth years following the grant. Director Stock Option Plan A stock option plan for outside directors (Director Stock Option Plan) has terms closely paralleling the 1993 Stock Option Plan. The Company has reserved 100,000 shares for the Director Stock Option Plan and has granted 10,000 shares at $19.25 per share through December 31, 1994. Additional information relating to option shares under the 1993 Option Plan, and Director Stock Option Plan, is as follows: Number of Options 1993 1994 Options outstanding at beginning of year 182,302 Options granted 182,302 73,300 Options exercised Options cancelled (42,500) Options outstanding at end of year 182,302 213,102 Exercise prices of outstanding options $13.48 to $19.25 $12.75 to $19.25 None of the outstanding options were exercisable at either December 31, 1993 or 1994. In January 1995, 73,066 options were cancelled. Employee Stock Purchase Plan The 1993 Employee Stock Purchase Plan (1993 Purchase Plan) allows employees to purchase common stock of the Company in an amount not to exceed $25 thousand fair market value as of the grant date, at 85% of the market value per share on the dates of exercise. The Company has reserved 500,000 shares for issuance under the 1993 Purchase Plan. During 1994, 12,805 shares of common stock were issued under the plan (none issued in 1993). At December 31, 1994, 1,587,195 shares of authorized but unissued common stock have been reserved for potential future issuance under the Company s various stock option and purchase plans. Stock Warrant Plan During 1993, 108,630 shares of common stock were issued upon exercise of certain stock warrants granted in previous years. The Company recorded a nonrecurring incentive compensation charge of approximately $1.3 million (approximately $800 thousand or $.09 per share, net of tax) in 1993 in connection with the exercise of such warrants. The Stock Warrant Plan was terminated by the Company s Board of Directors. 10. EMPLOYEE BENEFIT PLANS 401(k) Plan A 401(k) plan, which covers substantially all employees meeting minimum eligibility requirements, requires that the Company match a certain percent of employee contributions and allows the Company to make optional year-end contributions. Total 401(k) plan expense was $288,060, $293,914 and $403,225 in 1992, 1993 and 1994, respectively. Voluntary Employees Beneficiary Association A Voluntary Employees Beneficiary Association (VEBA) trust was established in September 1991, principally to administer employee health care costs. During 1992, 1993 and 1994, the Company made contributions to the VEBA of $1,171,317, $1,338,475 and $1,458,936, respectively. The Company has no significant obligations to its present or former employees with respect to retiree health care benefits or other nonpension postretirement benefits. Accordingly SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions, had no impact on the Company. 11. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION The Company operates in one business segment the manufacture, sale and service of uninterruptible, computer-grade power systems. Comparative data for the domestic and foreign operations is as follows:
Year ended December 31 1992 1993 1994 Sales: All domestic operations $112,421,969 $125,229,092 $140,978,487 Sales to foreign subsidiaries (11,807,817) (16,399,168) (21,809,369) Domestic sales to unaffiliated customers 100,614,152 108,829,924 119,169,118 Foreign subsidiaries: Europe 14,575,677 18,073,145 23,721,693 Asia 2,176,543 3,033,806 4,289,855 Other 1,429,145 2,700,970 3,069,422 Sales to parent - - (809,351) $118,795,517 $132,637,845 $149,440,737 Net income (loss): Domestic operations$ 11,903,179 $ 11,653,297 $ 10,903,692 Foreign subsidiaries: Europe 573,436 790,854 227,428 Asia 87,983 138,323 (541,280) Other 618,012 657,782 515,406 $ 13,182,610 $ 13,240,256 $ 11,105,246 Identifiable assets at December 31: Domestic operations $ 39,384,594 $ 60,660,479 $ 66,363,735 Foreign subsidiaries: Europe 6,068,245 7,039,367 9,640,067 Asia 939,695 1,106,912 11,828,096 Other 1,218,941 1,326,458 1,609,838 $ 47,611,475 $ 70,133,216 $89,441,736
Sales to foreign subsidiaries are at prices approximating those charged to unaffiliated customers. Export sales to unaffiliated customers by domestic operations totaled approximately $15.2 million, $18.5 million and $21.8 million during 1992, 1993 and 199, respectively. 12. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITOR'S REPORT Effective June 13, 1995, the Company was acquired by General Signal Corporation pursuant to a cash tender offer of $21 per common share. In connection with the acquisition, the Company incurred $4.7 million in nonrecurring charges, which were recorded in May 1995. Appendix B
Best Power Technology, Incorporated Condensed Consolidated Statements of Income (Unaudited) Three Months Ended March 31, 1995 1994 Net sales $35,284,429 $33,005,077 Cost of goods sold 21,118,741 19,309,329 Gross profit 14,165,688 13,695,748 Operating expenses: Selling and marketing 6,222,603 5,384,542 Administrative 2,764,055 2,384,286 Research and development 1,999,156 2,171,118 10,985,814 9,939,946 Income from operations 3,179,874 3,755,802 Other income (expense): Interest income 143,928 184,579 Interest expense (133,765) (12,327) Foreign currency gain 477,348 107,669 Miscellaneous (18,819) 784 Minority interest 367,131 - 835,823 280,705 Income before income taxes 4,015,697 4,036,507 Income taxes 1,487,403 1,374,576 Net income $2,528,294 $2,661,931 Net income per common share $ .27 $ .28 Weighted average number of common shares 9,522,833 9,657,874
See accompanying Notes to Condensed Consolidated Financial Statements.
Best Power Technology, Incorporated Condensed Consolidated Balance Sheets March 31 December 31 1995 1994 Unaudited Assets Current assets: Cash and cash equivalents $14,256,192 $12,525,006 Accounts receivable - trade allowance of $440,000 in 1995 and $450,000 in 1994 21,460,185 22,055,672 Other receivables 253,348 814,630 Inventories (Note 2) 25,386,791 24,902,474 Prepaid expenses and other assets 1,301,776 845,082 Deferred tax benefits 3,513,989 3,729,592 Total current assets 66,172,281 64,872,456 Property, plant and equipment, net 21,526,541 20,656,877 Intangible assets, net 3,851,678 3,912,403 Total assets $91,550,500 $89,441,736 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 7,510,966 $ 7,868,813 Advance payments - customer service contracts 6,495,219 6,471,549 Income taxes payable 681,590 465,538 Accrued liabilities 6,270,822 6,603,997 Current maturities of long-term debt and capital lease obligations 2,912,556 2,884,231 Total current liabilities 23,871,153 24,294,128 Advance payments - customer service contracts 3,817,548 3,807,824 Long-term debt and capital lease obligations 2,289,649 2,276,804 Deferred tax liability 151,962 112,274 Total liabilities 30,130,312 30,491,030 Minority interest 1,083,027 1,450,158 Stockholders' equity: Preferred stock - - Common stock 96,762 96,707 Additional paid-in capital 38,720,710 38,658,307 Retained earnings 23,366,163 20,837,869 Cumulative foreign currency translation adjustments 222,276 (23,585) Treasury stock (2,068,750) (2,068,750) Total stockholders' equity 60,337,161 57,500,548 Total liabilities and stockholders' equity $91,550,500 $89,441,736
See accompanying Notes to Condensed Consolidated Financial Statements. Best Power Technology, Incorporated Condensed Consolidated Statement of Stockholders' Equity Three months ended March 31, 1995 (Unaudited)
Cumulative Common Stock, $.01 Par Foreign Value, Authorized Additional Currency Treasury Total 25,000,000 Shares Paid-in Retained Translation Stock Stockholders' Shares Amount Capital Earnings Adjustments Equity Balance January 1, 1995 9,520,679 $96,707 $38,658,307 $20,837,869 $ (23,585) $(2,068,750) $57,500,548 Net Income - - - 2,528,294 - - 2,528,294 Foreign currency translation adjustments - - - - 245,861 - 245,861 Issuance of stock 5,499 55 62,403 - - - 62,458 Balance March 31, 1995 9,526,178 96,762 38,720,710 23,366,163 222,276 (2,068,750) $60,337,161
See accompanying Notes to Condensed Consolidated Financial Statements. Best Power Technology, Incorporated Condensed Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31 1995 1994 Operating activities Net Income $2,528,294 $2,661,931 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 676,190 475,621 Deferred tax benefits 255,291 (197,257) Minority interest (367,131) - Changes in operating assets and liabilities: Receivables - trade 595,487 (677,500) Other receivables 561,282 (306,323) Inventories (484,317) (3,178,048) Prepaid expenses and other assets (210,833) 722,495 Accounts payable (357,847) (840,186) Advance payments - customer service contracts 33,394 183,905 Income taxes payable 216,052 689,773 Accrued liabilities (333,175) (114,298) Total adjustments 584,393 (3,241,818) Net cash provided by (used in) operating activities 3,112,687 (579,887) Investing activities Capital expenditures (1,485,129) (806,968) Net cash used in investing activities (1,485,129) (806,968) Financing activities Proceeds from issuance of common stock 62,458 - Payments on notes receivable from stockholders - 15,716 Proceeds from debt and capital lease obligations, net 41,170 - Net cash provided by financing activities 103,628 15,716 Net increase (decrease) in cash and cash equivalents 1,731,186 (1,371,139) Cash and cash equivalents at beginning of year 12,525,006 19,100,693 Cash and cash equivalents at end of period $14,256,192 $17,729,554 Best Power Technology, Incorporated Notes to Condensed Consolidated Financial Statements March 31, 1995 1. Basis of Presentation The accompanying condensed consolidated financial statements of Best Power Technology, Incorporated and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10- Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and results of operations have been included. These adjustments are of a normal recurring nature. Operating results for the three month period ended March 31, 1995 are not necessarily indicative of the results that might be expected for the year ended December 31, 1995. These interim statements should be read in conjunction with the audited financial statements, related footnotes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's 1994 Annual Report to Stockholders. 2. Inventories The components of inventories are as follows: March 31 December 31 1995 1994 (Unaudited) Raw materials $13,671,289 $12,229,847 Work in process 717,670 498,782 Finished goods 10,997,832 12,173,845 Total $25,386,791 $24,902,474 3. Subsequent Event On May 10, 1995, the Company announced that it had entered into an agreement with General Signal Corporation under which General Signal would acquire the Company for $200 million, or $21.00 per share, in cash. The agreement, which was unanimously approved by the Company's Board of Directors, provides for General Signal to make a cash tender offer for all outstanding shares of the Company's common stock at a price of $21.00 per share. The tender offer will be followed as soon as possible by a second- step merger in which each share of the Company's common stock not acquired in the tender offer will be converted into the right to receive $21.00 in cash. The tender offer is subject to customary terms and conditions, including the valid tender of a majority of the outstanding shares and the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Appendix C General Signal Corporation Unaudited Pro Forma Condensed Consolidated Financial Statements Introductory Note The following unaudited pro forma condensed consolidated financial statements have been prepared by GSX management. These statements reflect GSX's acquisition of Best and combine the historical consolidated financial statements of GSX and Best for the periods indicated using the purchase method of accounting. The unaudited pro forma condensed consolidated balance sheet reflects adjustments as if the acquisition had occurred on March 31, 1995. The unaudited pro forma condensed consolidated statement of earnings has been prepared assuming the acquisition of Best had occurred at the beginning of GSX's fiscal year ended December 31, 1994. These pro forma statements should be read in conjunction with the historical consolidated financial statements and related notes of GSX and Best. The pro forma condensed consolidated financial statements have been prepared using the following facts and assumptions: GSX acquired the common stock of Best for a total cash payment of approximately $195 million. GSX has acquired 97% of the outstanding common stock of Best as of June 14, 1995 and expects to acquire the remaining shares before the end of the third quarter of 1995. GSX will borrow, on a long-term basis, the $195 million in funds necessary to finance the acquisition. GSX preliminarily estimates that it will incur transaction costs of $2.5 to $3.0 million and combination and integration costs ranging from $9.2 to $12.7 million. The transaction costs include investment banker and professional fees. The combination and integration costs include severance and relocation of key personnel and product lines, primarily related to existing General Signal locations, and factory rearrangement and administrative rationalization, primarily at Best's locations. The pro forma balance sheet and statement of earnings have not been adjusted to reflect these potential liabilities as the specific amounts of the liabilities have not been finalized. Transaction and severance costs related to Best employees will be accounted for as purchase price adjustments, severance costs and certain exit costs related to existing GSX locations will be accrued as one-time restructuring charges as of June 30, 1995, and all other combination and integration costs will be expensed as incurred over the next twelve months as the plans are implemented. Total purchase price adjustments resulting from these costs are expected to range from $3.7 to $5.3 million and one-time restructuring charges are expected to range from $4.5 to $5.8 million. The purchase price of Best will be allocated to the assets and liabilities of Best based upon their respective fair values at the date of acquisition. Such allocations will be based on evaluations and estimations which are still in process. Preliminarily, GSX estimates that it will make adjustments reducing the values of inventories and accounts receivable and increasing warranty and income tax accruals in an amount ranging from $6.3 to $15.7 million. For purposes of the accompanying pro forma statements, the pro forma adjustments have not been reflected because the preliminary valuation is subject to a final determination of fair values. The remaining excess of cost over the net assets of Best after the valuation adjustments discussed above will be allocated to goodwill and any other identifiable intangibles. Pro forma adjustments to the condensed consolidated statement of earnings reflecting anticipated cost savings and other synergies resulting from the planned integration of Best and GSX are, under most circumstances, not permitted and accordingly have not been reflected in the pro forma financial statements. The pro forma results are not intended to be a projection of future results and are not necessarily indicative of the results which would have occurred if the business combination had been in effect on the dates presented. Unaudited Pro Forma Condensed Consolidated Statement of Earnings Year Ended December 31, 1994 (In millions, except per share data) Pro GSX Best Adjustments forma Net Sales $1,527.7 $149.4 $1,677.1 Cost of sales 1,109.5 86.4 1,195.9 Gross profit 418.2 63.0 481.2 Operating expenses: SG&A 292.3 - 45.3(c) 342.6 5.0(e) Disposition of businesses and special items (46.2) (46.2) Selling and marketing 26.4 (26.4)(c) - Administrative 10.9 (10.9)(c) - Research and development 8.6 (8.6)(c) - Total operating costs and expenses 246.1 45.9 4.4 296.4 Operating earnings 172.1 17.1 (4.4) 184.8 Other income (expense): Interest income 0.7 (0.7)(c) - Interest expense, net (11.8) (0.2) (11.7)(d) (23.0) 0.7 (c) Foreign currency gain (loss) 0.2 (0.2)(c) - Miscellaneous 0.1 (0.1)(c) - Minority interest 0.3 (0.3)(c) - (11.8) 1.1 (12.3) (23.0) Earnings from continuing operations 160.3 18.2 (16.7) 161.8 Income taxes 56.2 7.2 (4.7) 58.7 Earnings from continuing operations $104.1 $11.0 $(12.0) $103.1 Earnings per share of common stock from continuing operations $2.20 $2.18 Average common shares outstanding 47.3 47.3 See accompanying notes to unaudited pro forma condensed consolidated financial statements. General Signal Corporation Unaudited Pro Forma Condensed Consolidated Statement of Earnings Three Months Ended March 31, 1995 (In millions, except per share data) Pro As Reported GSX Best Adjustments forma Net Sales $411.0 $35.3 $446.3 Cost of sales 293.3 21.1 314.4 Gross profit 117.7 14.2 131.9 SG&A expenses 71.6 10.2(c) 83.1 1.3(e) Selling and marketing 6.2 (6.2)(c) - Administrative 2.8 (2.8)(c) - Research and development 2.0 (2.0)(c) - Total operating costs and expenses 71.6 11.0 0.5 83.1 Operating earnings 46.1 3.2 (0.5) 48.8 Other income (expense): Interest income 0.1 (0.1)(c) - Interest expense, net (4.1) (0.1) (2.9)(d) (7.0) 0.1 (c) Foreign currency gain (loss) 0.5 (0.5)(c) - Minority interest 0.3 (0.3)(c) - (4.1) 0.8 (3.7) (7.0) Earnings before income taxes 42.0 4.0 (4.2) 41.8 Income taxes 14.7 1.5 1.2 15.0 Net earnings $27.3 $2.5 ($3.0) $26.8 Earnings per share of common stock $0.58 $0.57 Average common shares outstanding 47.2 47.2 See accompanying notes to unaudited pro forma condensed consolidated financial statements. General Signal Corporation Unaudited Pro Forma Condensed Consolidated Balance Sheet As of March 31, 1995 (In millions, except per share data) Pro GSX Best Adjustments forma Cash and cash equivalents $5.0 $14.3 $19.3 Accounts receivable 259.7 21.7 281.4 Inventories 217.2 25.4 242.6 Prepaid expenses and other current assets 46.7 1.3 48.0 Assets held for sale 160.0 - 160.0 Deferred income taxes 44.1 3.5 47.6 Total current assets 732.7 66.2 - 798.9 Property, plant and equipment 279.9 21.5 301.4 Intangibles 187.8 3.9 (60.3)(a) 326.4 195.0 (b) Other assets 144.3 - 144.3 Deferred income taxes 17.9 - 17.9 Total assets $1,362.6 $91.6 $134.7 $1,588.9 Short-term borrowings and current maturities $3.9 $2.9 $6.8 Accounts payable 136.6 7.5 144.1 Accrued expenses 151.7 12.8 164.5 Income taxes 26.9 0.7 27.6 Total current liabilities 319.1 23.9 - 343.0 Long-term debt, less current maturities 308.1 2.3 195.0(b) 505.4 Accrued postretirement and postemployment benefits 156.7 - 156.7 Other liabilities 12.2 5.1 17.3 Total long-term liabilities 477.0 7.4 195.0 679.4 Shareholders' equity 566.5 60.3 (60.3)(a) 566.5 Total liabilities and shareholders' equity $1,362.6 $91.6 $134.7 $1,588.9 See accompanying notes to unaudited pro forma condensed consolidated financial statements. General Signal Corporation Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements The adjustments to give pro forma effect to GSX's acquisition of Best and the estimated purchase price allocation at March 31, 1995 are as follows: (a) The shareholders' equity of Best of $60.3 million has been reclassified to intangibles. (b) Consists of long-term borrowings by GSX of $195 million to finance the purchase of Best. (c) Certain reclassifications have been made to conform GSX and Best presentation of selling, general and administrative expenses. (d) Interest expense was recognized as if the $195 million of debt issued to acquire Best had been outstanding from the beginning of the period. The debt is assumed to carry a financing rate of 6 percent per year. (e) Goodwill and other identified intangibles are expected to range from $150 to $160 million. The pro forma statement of earnings reflects amortization of $150 million of goodwill and intangibles over 30 years since the preliminary valuation is subject to final determination of fair values and related lives. The amortization is reflected in the pro forma statement of earnings as if the goodwill were amortized from the beginning of the period. SIGNATURES Pursuant to the requirements 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/ Terry J. Mortimer Terry J. Mortimer Vice President and Controller Chief Accounting Officer June 26, 1995 SIGNATURES Pursuant to the requirements 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 Terry J. Mortimer Vice President and Controller Chief Accounting Officer June 26, 1995 EX-23 2 Exhibit 23 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 33-33929) of General Signal Corporation and in the related Prospectus of our report dated February 3, 1995, with respect to the consolidated financial statements of Best Power Technology, Incorporated as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994 included in this Form 8-K dated June 26, 1995. Milwaukee, Wisconsin Ernst & Young LLP -----END PRIVACY-ENHANCED MESSAGE-----