-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HoVrz+AmsGeyYlGYrqTa0a5DiMGhLt3/6ESuT7yjJ8Gtu0lF4oXos/uGUB/pWcsP MDsLS6RX5ZjnDLv2UXd7XA== 0000040834-95-000020.txt : 19951031 0000040834-95-000020.hdr.sgml : 19951031 ACCESSION NUMBER: 0000040834-95-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951019 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: 3669 IRS NUMBER: 160445660 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 95581777 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-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1995 Commission file number 1-996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 GENERAL SIGNAL CORPORATION (Exact name of registrant as specified in its charter) New York 16-0445660 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) High Ridge Park, Box 10010, Stamford, Connecticut 06904 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (203) 329-4100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. X (Yes) (No) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $1.00 47,436,328 (Class) (Outstanding at October 17, 1995) PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statement of Earnings (In millions, except per share data) (Unaudited) Three Months Ended September 30, 1995 1994 Net sales $ 455.5 $ 390.0 Cost of sales 320.1 276.3 Selling, general and administrative expenses 86.7 68.6 406.8 344.9 Operating earnings 48.7 45.1 Interest expense, net (7.5) (3.3) Earnings before income taxes 41.2 41.8 Income taxes 15.6 14.2 Earnings from continuing operations 25.6 27.6 Discontinued operations (14.4) 0.2 Net earnings $ 11.2 $ 27.8 Earnings per share of common stock: Continuing operations $ 0.54 $ 0.58 Discontinued operations (0.30) .01 Net earnings $ 0.24 $ 0.59 Dividends declared per common share $ 0.240 $ 0.225 Average common shares outstanding 47.5 47.3 See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statement of Earnings (In millions, except per share data) (Unaudited) Nine Months Ended September 30, 1995 1994 Net sales $ 1,287.9 $ 1,111.1 Cost of sales 910.8 788.4 Selling, general and administrative expenses 234.1 200.0 Acquisition of businesses and special items 7.4 - - 1,152.3 988.4 Operating earnings 135.6 122.7 Interest expense, net (16.4) (9.0) Earnings before income taxes 119.2 113.7 Income taxes 42.9 38.7 Earnings from continuing operations 76.3 75.0 Discontinued operations (64.0) 2.4 Net earnings $ 12.3 $ 77.4 Earnings per share of common stock: Continuing operations $ 1.61 $ 1.58 Discontinued operations (1.35) 0.06 Net earnings $ 0.26 $ 1.64 Dividends declared per common share $ 0.720 $ 0.675 Average common shares outstanding 47.3 47.3 See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Balance Sheet (In millions) (Unaudited) September 30, December 31, Assets 1995 1994 Current assets: Cash and cash equivalents $ 4.5 $ 0.3 Accounts receivable 296.7 258.3 Inventories 236.0 213.3 Prepaid expenses and other current assets 36.3 44.5 Assets held for sale at estimated realizable value 47.7 153.6 Deferred income taxes 64.9 47.2 Total current assets 686.1 717.2 Property, plant, and equipment 306.2 280.5 Intangibles 398.5 194.3 Other assets 150.8 134.5 Deferred income taxes 13.0 16.1 $1,554.6 $1,342.6 See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Balance Sheet-Continued (In millions) (Unaudited) September 30, December 31, Liabilities and Shareholders' Equity 1995 1994 Current liabilities: Short-term borrowings and current maturities of long-term debt $ 4.5 $ 2.2 Accounts payable 146.5 152.9 Accrued expenses 175.1 183.1 Income taxes 25.5 18.9 Total current liabilities 351.6 357.1 Long-term debt, less current maturities 503.9 269.1 Accrued postretirement and postemployment obligations 150.9 161.2 Other liabilities 18.3 7.3 Total long-term liabilities 673.1 437.6 Shareholders' equity: Common stock, authorized 150.0 shares; issued 64.2 shares at September 30, 1995 and 63.7 shares at December 31, 1994 77.8 77.4 Additional paid-in capital 296.6 281.1 Retained earnings 598.7 620.5 Cumulative translation adjustments (10.0) (12.1) Common stock in treasury, at cost; 16.9 shares at September 30, 1995 and 16.6 shares at December 31, 1994 (433.2) (419.0) Total shareholders' equity 529.9 547.9 $1,554.6 $1,342.6 See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statement of Cash Flows (In millions) (Unaudited) Increase (Decrease) in Cash and Cash Equivalents Nine Months Ended September 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Earnings from continuing operations $ 76.3 $ 75.0 Adjustments to reconcile earnings to net cash from operating activities: Deferred taxes 3.8 1.2 Depreciation and amortization 44.6 40.1 Pension credits (7.1) (9.4) Employee stock benefits 11.3 2.6 Other, net (0.7) (5.6) Changes in working capital (33.9) (70.5) Net cash from operating activities 94.3 33.4 CASH FLOWS FROM INVESTING ACTIVITIES: Divestitures 33.7 26.2 Acquisitions (270.3) (17.2) Capital expenditures (32.0) (54.9) Other, net 4.5 (1.8) Net cash from investing activities (264.1) (47.7) CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short and long-term borrowings 217.6 55.8 Dividends paid (34.0) (32.0) Shares repurchased (17.0) (8.4) Proceeds from stock options 7.4 3.3 Net cash from financing activities 174.0 18.7 EFFECT OF EXCHANGE RATE CHANGES ON CASH - - 0.4 Net change in cash and cash equivalents 4.2 4.8 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 0.3 1.3 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4.5 $ 6.1 See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Financial Statements (Unaudited) (In millions, except per share data) 1. The accompanying unaudited financial statements reflect all adjustments (consisting of normal, recurring items) necessary for the fair presentation of results for these interim periods. These results are based upon generally accepted accounting principles consistently applied with those used in the preparation of the company's 1994 Annual Report on Form 10-K. 2. Inventories September 30, December 31, 1995 1994 Finished goods $ 76.5 $ 62.1 Work in process 70.2 68.0 Raw material and purchased parts 111.6 106.4 Total FIFO cost 258.3 236.5 Excess of FIFO cost over LIFO inventory value (22.3) (23.2) Net carrying value $ 236.0 $ 213.3 3. Business Segment Information Three Months Ended September 30, 1995 1994 Net sales: Process Controls $ 176.7 $ 150.6 Electrical Controls 217.4 163.9 Industrial Technology 61.4 75.5 $ 455.5 $ 390.0 Operating earnings: Process Controls $ 22.6 $ 19.3 Electrical Controls 19.9 14.4 Industrial Technology 12.0 15.7 Total operating earnings before unallocated expenses, equity income and interest 54.5 49.4 Equity income 0.4 0.1 Net interest expense (7.5) (3.3) Unallocated expenses (6.2) (4.4) Earnings before income taxes $ 41.2 $ 41.8 3. Business Segment Information Nine Months Ended September 30, (continued) 1995 1994 Net sales: Process Controls $ 538.6 $ 438.5 Electrical Controls 547.4 450.7 Industrial Technology 201.9 221.9 $ 1,287.9 $ 1,111.1 Operating earnings: Process Controls $ 70.7 $ 56.5 Electrical Controls 40.0 (a) 34.9 Industrial Technology 39.5 42.1 Total operating earnings before unallocated expenses, equity income and interest 150.2 133.5 Equity income 0.6 0.7 Net interest expense (16.4) (9.0) Unallocated expenses (15.2) (11.5) Earnings before income taxes $ 119.2 $ 113.7 (a) Includes $7.4 million of one-time charges related to the acquisition of Best Power Technology, Inc. 4. Property, Plant and Equipment September 30, December 31, 1995 1994 Property, plant and equipment, at cost $ 680.9 $ 611.8 Accumulated depreciation and amortization (374.7) (331.3) Property, plant and equipment, net $ 306.2 $ 280.5 5. Supplemental Information-Statement of Cash Flows Nine Months Ended September 30, 1995 1994 Cash paid (received) for: Interest $ 16.6 $ 7.7 Income taxes $ 5.5 $ 6.6 Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired $ 277.3 $ 17.2 Cash paid (270.3) (17.2) $ 7.0 $ - - 6. Discontinued Operations In the second quarter of 1995, the company recorded a $75 million before tax charge ($49.6 million after tax) for additional expected losses relating to the disposal of Leeds & Northrup (L&N), accounted for as a discontinued operation. Portions of L&N have been sold or are under contract for sale. Based on current discussions with potential buyers for the remaining portions of L&N and for Dynapower/Stratopower, also a discontinued operation, the company has recorded, in the third quarter, an additional $24.9 million before tax charge ($14.4 million after tax) for additional expected losses on disposition. Although the provisions for losses recorded through September 30, 1995 represent management's best estimate of the likely outcome based on contracts signed and current negotiations, the final sales proceeds and closing costs are subject to further negotiations and are not determinable at this time. 7. Acquisitions On June 13, 1995, the company completed a cash tender offer for Best Power Technology, Inc. ("Best"). The aggregate purchase price was approximately $196 million, which was financed through the issuance of commercial paper. The acquisition has been accounted for as a purchase. The company recorded a $7.4 million before tax charge ($4.8 million after tax) during the second quarter of 1995 primarily for severance and other consolidation costs relating to the combination of existing General Signal locations with Best. Best is a leading manufacturer of uninterruptible power supply products, which provide backup power to protect computers, information networks, and other critical systems from power line disturbances. On July 27, 1995, the company acquired MagneTek Electric Inc. ("Waukesha") for $74 million in cash and the assumption of liabilities. The purchase price was financed through the issuance of commercial paper. The acquisition has been accounted for as a purchase. Waukesha is a market leader in the design and manufacture, sale and installation of medium-power transformers and related products. Power transformers are used by utilities to reduce or "step down" power in substations before it is sent on to residential, commercial and industrial users. "Medium" power transformers have a capacity of 10 to 100 million volt amperes (MVA). 7. Acquisitions (continued) Unaudited pro forma data giving effect to the acquisitions of Best and Waukesha as if they had been acquired at the beginning of 1994 are shown below: Nine Months Ended 1995 1994 Net sales $ 1,399.0 $ 1,295.4 Net earnings $ 4.2(1) $ 76.1 Earnings per share $ 0.09(1) $ 1.61 (1) Includes acquisition-related before tax charges of $7.4 million ($4.8 million after tax or $0.10 per share) and after tax charges for discontinued operations of $64.0 million or $1.35 per share. 8. Other Acquisitions On May 8, 1995, the company and Data Switch Corporation agreed to merge. Subject to Data Switch shareholder approval, the merger is expected to be completed during the fourth quarter of 1995. The agreement calls for General Signal to issue up to 2.1 million shares of common stock in exchange for all of the outstanding shares of Data Switch. The company intends to account for the merger as a pooling of interests. Data Switch designs, manufactures, markets and services a range of products for large scale, high speed data networks. Data Switch is the number two supplier, behind IBM, of switches which connect mainframe computer systems with local or remote peripherals such as printers, magnetic tape drives and disk drives. 9. Repurchase of Shares In March 1994, a two year program to repurchase up to 3.4 percent or 1.6 million shares of the company's outstanding common stock at that time was approved by the Board of Directors. These shares are being purchased systematically in open market transactions, and are being used to offset dilution from the expected exercise of employee stock options arising from the company's executive stock ownership program. To date, approximately 1.1 million shares have been repurchased under the program. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Third Quarter 1995 Compared With Third Quarter 1994 Third Quarter 1995 1994 Change Net sales $455.5 $390.0 16.8% Sales related to comparable businesses were relatively flat compared to 1994, and substantially all the increase results from companies acquired in 1995 and late 1994. International sales in 1995 totaled 24 percent of the company's net sales. Export sales increased 31 percent to approximately $40 million. This increase was attributable to greater export activity in Process and Electrical Controls as well as the acquisitions of Fairbanks-Morse Pump Corporation ("Fairbanks") and Waukesha in December 1994 and July 1995, respectively. Process Controls sector sales increased 17 percent from increased shipments of pumps, valves, industrial mixers, crystal growing furnaces and laboratory equipment. The increased pump sales resulted primarily from the acquisition of Fairbanks. Overall, sales in the Electrical Controls sector increased 33 percent. The acquisitions of Best and Waukesha accounted for substantially all of the sector's increase. Improvements in building and life safety products, broadcast equipment and power transformers were offset by lower volume from major motors business customers' production curtailments. Industrial Technology sector sales decreased 19 percent due to the completion of the U.S. Postal Service stamp vending machine contract as well as sales declines in OEM bicycle and automotive component products. Third Quarter 1995 1994 Change Gross profit $135.4 $113.7 19.1% Percentage of net sales 29.7% 29.1% Gross profit as a percentage of sales improved 0.6 percent. The increase is primarily the result of higher margins on Best sales as well as improved cost structures at several businesses. Margin improvements were strongest for valve, broadcast equipment and telecommunication products. Margin improvements were also realized due to the completion of a lower margin U.S. Postal Service contract. Included in gross profit is $0.7 million of inventory write-offs that resulted from the bankruptcy of a major electric motors customer. Third Quarter 1995 1994 Change Selling, general and administrative expenses $86.7 $68.6 26.4% Percentage of net sales 19.0% 17.6% Selling, general and administrative expenses increased as a percentage of sales by 1.4 percent. Higher operating expenses-to-sales at Best, as well as $0.9 million of merger integration expenses for Best and Waukesha and $0.4 million of expenses related to the shut-down of Telenex's Springfield, Virginia plant were the principal reasons for the increase. Included in selling, general and administrative expenses in 1995 and 1994 were pension credits of $2.4 million and $2.9 million, respectively. Third Quarter 1995 1994 Change Operating earnings $48.7 $45.1 8.0% Percentage of net sales 10.7% 11.6% Earnings from the Process Controls sector were up 17 percent. This was due to stronger sales activity, the acquisition of Fairbanks and productivity improvements in our mixer and valve businesses. Electrical Controls sector operating earnings increased 38 percent caused predominantly by the additions of Best and Waukesha. Earnings for the Industrial Technology sector declined 24 percent. The decline was primarily the result of dumping OEM bicycle components by Chinese competition and due to the completion of the U.S. Postal Service contract. In addition, the third quarter of 1994 sector results included $1.5 million of royalty income that did not repeat in the same quarter in 1995. Unallocated expenses were $6.2 million in 1995 compared to $4.4 million in 1994. Unallocated expenses in 1995 were positively impacted by $2.5 million of gains on the sale of assets, offset by higher corporate office expenses that resulted from the establishment of a centralized purchasing function, and greater activity in merger integration and corporate development. Unallocated expenses in 1994 were reduced by a $1.3 million gain on the sale of investments. Third Quarter 1995 1994 Change Net interest expense $7.5 $3.3 127.3% Percentage of net sales 1.6% 0.8% Net interest expense increased from higher average debt levels that resulted from the acquisitions of Fairbanks, Best and Waukesha in December 1994, June 1995 and July 1995, respectively, and an increase in borrowing rates. Earnings from continuing operations were $25.6 million or $0.54 per share in 1995 compared to $27.6 million or $0.58 per share in 1994. An adjustment of $1.2 million ($0.03 per share) to increase the 1995 full year effective tax rate from 35 percent to 36 percent was recorded in the third quarter due to an increase in nondeductible goodwill related to the acquisitions of Best and Waukesha. The 1995 full year effective tax rate of 36% was aided by the anticipated utilization of net operating loss carryforwards and a corresponding reduction of $7 million in the related valuation allowance. The company's effective tax rate in 1994 was 34 percent. Results of Operations - First Nine Months 1995 Compared With First Nine Months 1994 First Nine Months 1995 1994 Change Net sales $1,287.9 $1,111.1 15.9% Sales improved 16 percent over 1994 levels, two-thirds of which related to acquisitions and the remainder reflected improved order activity. International sales in 1995 totaled 22 percent of the company's net sales. Export sales increased 50 percent to approximately $130 million, reflecting greater export activity in Process and Electrical Controls and the acquisition of Fairbanks in late 1994. Process Controls sector sales increased 23 percent from increased shipments of pumps, valves, industrial mixers, crystal growing furnaces and laboratory equipment. The increased pump sales resulted primarily from the acquisition of Fairbanks. The increased mixer business sales were a result of higher foreign and export sales. Overall, sales in the Electrical Controls sector increased 21 percent. The acquisitions of Best and Waukesha accounted for approximately three-fourths of the sector's increase. The remainder resulted from improved order activity in building and life safety products, broadcast equipment and power transformers. Industrial Technology sector sales decreased 9 percent due to the completion of the U.S. Postal Service stamp vending machine contract as well as sales declines in telecommunications and OEM bicycle and automotive component products. First Nine Months 1995 1994 Change Gross profit $377.1 $322.7 16.9% Percentage of net sales 29.3% 29.0% Gross profit as a percentage of sales improved 0.3 percent. The increase is primarily the result of higher margins at acquired companies as well as improved cost structures at several businesses. Margin improvements were strongest for valve, broadcast equipment and telecommunication products. Margin improvements were also realized due to the completion of a lower margin U.S. Postal Service contract in 1994. Gross profits included $0.9 million of LIFO reserve liquidations in 1995 and $0.5 million in 1994. Also included in gross profit in 1995 is $0.7 million of inventory write-offs resulting from the bankruptcy of a major electric motors customer. First Nine Months 1995 1994 Change Selling, general and administrative expenses $234.1(a) $200.0 17.1% Percentage of net sales 18.2% 18.0% (a) Excludes $7.4 million of one time charges relating to severance, asset write downs and other Best acquisition charges recorded in the second quarter. Selling, general and administrative expenses were flat as a percentage of sales. Higher operating expenses-to-sales at Best as well as $1.1 million of integration expenses and $0.6 million of restructuring expenses contributed to the increase. However, these higher costs were offset by gains on asset sales, as well as pension credits of $7.1 million and $9.4 million in 1995 and 1994, respectively. First Nine Months 1995 1994 Change Operating earnings $143.0(a) $122.7 16.5% Percentage of net sales 11.1% 11.0% (a) Excludes $7.4 million of one time charges relating to severance, asset write downs and other Best acquisition charges recorded in the second quarter. Earnings from the Process Control sector were up 25 percent. One-fourth of the increase related to the acquisition of Fairbanks and the remainder was primarily due to stronger sales activity and productivity improvements in our mixer and valve businesses. Electrical Controls sector operating earnings increased 36 percent exclusive of the $7.4 million one-time charge taken in the second quarter of 1995. The increase was caused predominantly by the additions of Best and Waukesha, and by $2.0 million of non-recurring items, principally representing the cash settlement of insured matters. Earnings for the Industrial Technology sector declined 6 percent. The decline was the result of dumping OEM bicycle components by Chinese competition and the completion of the U.S. Postal Service contract. Industrial Technology earnings included $1.5 million of royalty income in both years. In addition, 1994 Industrial Technology earnings were aided by $1.8 million of non-cash adjustments to reserves. Unallocated expenses were $15.2 million in 1995 compared to $11.5 million in 1994. Unallocated expenses in 1995 were positively impacted by $4.1 million of accrual adjustments that related primarily to the semiconductor equipment operations and environmental reserves, along with cash settlement of insured matters. Also included in 1995 unallocated expenses are gains on the sale of assets of $3.2 million, offset by higher corporate expenses due to the establishment of a centralized purchasing function, and greater activity in merger integration and corporate development. Unallocated expenses in 1994 were reduced by a $1.3 million gain on the sale of investments. First Nine Months 1995 1994 Change Net interest expense $16.4 $9.0 82.2% Percentage of net sales 1.3% 0.8% Net interest expense increased as a result of higher average debt levels that resulted from the acquisitions of Fairbanks, Best and Waukesha in December 1994, June 1995 and July 1995, respectively, and an increase in borrowing rates. Earnings from continuing operations, excluding one-time charges, were $81.1 million or $1.71 per share in 1995 compared to $75.0 million or $1.58 per share in 1994. The effective tax rate increased from 34 percent to 36 percent in 1995due to an increase in nondeductible goodwill amortization related to Best and Waukesha. The 1995 effective tax rate of 36 percent was aided by the anticipated utilization of net operating loss carryforwards and a corresponding reduction of $7 million in the related valuation allowance. Included in the 1994 effective tax rate were favorable adjustments to prior year tax liabilities and the recognition of net operating loss carryforwards. Financial Condition - September 30, 1995 Compared to December 31, 1994 Operations generated cash of $94.3 million, compared to $33.4 million for the same period in 1994, with the increase reflecting improved earnings and working capital management. Included in operating cash flows were expenditures of $47.4 million related to previously divested operations (primarily the semiconductor equipment operations) and $6.0 million for severance pay. These expenditures were charged against accruals. Management anticipates that these expenditures will result in lower future costs from higher productivity. The company acquired Best on June 13, 1995, for approximately $196 million and Waukesha on July 27, 1995 for approximately $74 million. Proceeds from the disposition of portions of the discontinued operations were approximately $33.7 million in 1995. The Company used $32 million for capital expenditures. Dividends paid totaled $34 million, common shares repurchased amounted to $17 million, and additional amounts borrowed during the first nine months totaled $218 million, most of which was for the acquisitions of Best and Waukesha. Long-term debt-to-total capitalization was 48.7 percent at September 30, 1995, with increases in borrowing levels reflecting primarily the acquisitions of Best and Waukesha. At September 30, 1995, the company had a $44.7 million valuation allowance established against its gross deferred tax assets of approximately $314 million. As a result of the acquisition of Best, the company recognized additional gross deferred tax assets of $10.5 million and an additional valuation allowances of $1.5 million against those deferred tax assets. In addition, the valuation allowance is presently projected to be reduced by $7 million during 1995 as a result of anticipated utilization of net operating loss carryforwards. The valuation allowance is based on management's assessment that it is more likely than not that only a portion of 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 million of such benefits would reduce goodwill. The company is well positioned to finance future working capital requirements and capital expenditures through current earnings and available credit facilities. The pending merger with Data Switch is expected to be completed through the issuance of up to 2.1 million additional shares of common stock. 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 durable goods orders, and strength in heavy industrial and utility markets is key to the success of the sector. The Electrical Controls sector depends upon several markets, principally the 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. PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 12.0 Calculation of Ratios of Earnings to Fixed Charges. (b) Form 8-K dated June 26, 1995 related to the acquisition of Best Power Technology, Inc. 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 DATE: October 19, 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 DATE: October 19, 1995 EX-12 2 Calculation of Ratios of Earnings to Fixed Charges General Signal Corporation (Dollars in millions) Exhibit (12.0) Nine Months Ended Sept. 30, Year Ended December 31, 1995 1994 1993 1992 1991 1990 Earnings: Earnings before income taxes 119.2 160.3 139.1 9.5 97.4 15.5 Add: fixed charges 23.2 20.2 22.6 35.3 39.3 46.4 $142.4 $180.5 $161.7 $44.8 $136.7 $ 61.9 Fixed charges: Interest Expense (Gross) 18.4 14.4 18.0 28.6 31.8 37.2 One-third of rent expense 4.8 5.8 4.6 6.7 7.5 9.2 $ 23.2 $ 20.2 $ 22.6 $ 35.3 $ 39.3 $ 46.4 Ratio 6.14 8.94 7.15 1.27 3.48 1.33 EX-27 3
5 0000040834 GENERAL SIGNAL CORP 1000 9-MOS DEC-31-1995 SEP-30-1995 4500 1000 311200 14500 236000 686100 680900 374700 1554600 351600 503900 77800 0 0 452100 1554600 1287900 1287900 910800 1144900 7400 0 16400 119200 42900 76300 (64000) 0 0 12300 0.26 0.26
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