-----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, Ujv3jxE+cn4TFUUTewWOmShoBfcyvJRqLse0sT1KmZfWzbQEwVIJlLSVf5HUXdgO whiQUHtSZtjoSyLeiz0Wyg== 0000040834-96-000006.txt : 19960422 0000040834-96-000006.hdr.sgml : 19960422 ACCESSION NUMBER: 0000040834-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960419 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 96548762 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 March 31, 1996 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), 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 49.6 million (Class) (Outstanding at April 9, 1996) PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Statement of Earnings (In millions, except per share data) (Unaudited) Three Months Ended March 31, 1996 1995 Net sales $ 481.7 $ 434.1 Cost of sales 351.4 308.8 Selling, general and administrative expenses 102.0 77.6 Gain on disposition (20.8) - - ------ ------ 432.6 386.4 Operating earnings 49.1 47.7 Interest expense, net 6.8 4.5 ------- ------- Earnings before income taxes 42.3 43.2 Income taxes 16.9 15.1 ------- --------- Net earnings $25.4 $28.1 ======= ========= Earnings per share $0.51 $0.57 ======= ======== Dividends declared per share $0.24 $0.24 ======= ======== Average shares outstanding 49.5 49.0 ======= ======== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Balance Sheet (In millions) (Unaudited) March 31, December 31, Assets 1996 1995 Current assets: Cash and cash equivalents $ 15.9 $ 1.0 Accounts receivable 319.3 323.6 Inventories 243.1 234.7 Prepaid expenses and other current assets 30.3 30.1 Assets held for sale at estimated realizable value 20.1 60.4 Deferred income taxes 62.1 71.6 Total current assets 690.8 721.4 Property, plant, and equipment 302.7 312.7 Intangibles 402.4 406.0 Other assets 159.1 161.6 Deferred income taxes 12.6 11.5 ------ ------ $1,567.6 $1,613.2 ======== ======== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Balance Sheet-Continued (In millions) (Unaudited) March 31, December 31, Liabilities and Shareholders' Equity 1996 1995 Current liabilities: Short-term borrowings and current maturities of long-term debt $ 5.2 $ 9.0 Accounts payable 180.6 158.1 Accrued expenses 229.0 233.8 Income taxes 34.1 31.2 ------- ------ Total current liabilities 448.9 432.1 Long-term debt, less current maturities 348.9 428.6 Accrued postretirement and postemployment obligations 143.8 146.9 Other liabilities 27.6 27.5 -------- ------- Total long-term liabilities 520.3 603.0 ------ -------- Shareholders' equity: Common stock: authorized 150.0 shares; issued 64.4 shares at March 31, 1996 and 64.3 shares at December 31, 1995 77.9 77.9 Additional paid-in capital 306.8 304.2 Retained earnings 596.4 582.9 Cumulative translation adjustments (3.2) (3.9) Common stock in treasury, at cost: 14.8 shares at March 31, 1996 and 15.0 shares at December 31, 1995 (379.5) (383.0) ------- ------- Total shareholders' equity 598.4 578.1 -------- -------- $1,567.6 $1,613.2 ======== ======== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statement of Cash Flow (In millions) (Unaudited) Three Months Ended March 31, 1996 1995 CASH FLOW FROM OPERATING ACTIVITIES: Net earnings $ 25.4 $ 28.1 Adjustments to reconcile earnings to net cash from operating activities: Gain on disposition (20.8) - - Non-cash charges 19.7 - - Deferred taxes 4.9 2.8 Depreciation and amortization 17.4 14.6 Pension credits (2.7) (2.2) Other, net 3.9 6.5 Changes in working capital (0.7) (56.0) ----- ----- Net cash from operating activities 47.1 (6.2) CASH FLOW FROM INVESTING ACTIVITIES: Divestitures 71.8 2.7 Capital expenditures (11.4) (12.8) Acquisitions, net of cash acquired - - 7.8 Other, net 0.6 (5.1) ----- ------ Net cash from investing activities 61.0 (7.4) CASH FLOW FROM FINANCING ACTIVITIES: Net change in short and long-term borrowings (83.5) 41.9 Dividends paid (11.8) (11.3) Issuance of common stock 3.0 0.8 Shares repurchased (0.9) (5.9) ------ ------ Net cash from financing activities (93.2) 25.5 ------ ------ Net change in cash and cash equivalents 14.9 11.9 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1.0 0.3 ------ ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15.9 $ 12.2 ====== ====== Interest paid $ 6.8 $ 3.5 Income taxes paid $ 4.7 $ 2.3 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 1995 Annual Report on Form 10-K. 2. Inventories March 31, December 31, 1996 1995 Finished goods $ 74.8 $ 73.9 Work in process 68.8 66.5 Raw material and purchased parts 121.7 17.6 -------- --------- Total FIFO cost 265.3 258.0 Excess of FIFO cost over LIFO inventory value (22.2) (23.3) -------- --------- Net carrying value $ 243.1 $ 234.7 ========= ========= 3. Business Segment Information Three Months Ended March 31, 1996 1995 Net sales: Process Controls $ 173.1 $ 175.6 Electrical Controls 222.6 160.1 Industrial Technology 86.0 98.4 ------- ------- $ 481.7 $ 434.1 ======= ======= Operating earnings: Process Controls $ 38.5 $ 22.1 Electrical Controls 10.5 12.5 Industrial Technology 7.2 16.4 -------- -------- Total operating earnings before unallocated expenses and interest 56.2 51.0 Net interest expense (6.8) (4.5) Unallocated expenses (7.1) (3.3) --------- --------- Earnings before income taxes $ 42.3 $ 43.2 ========== ========== 4. Property, Plant and Equipment March 31, December 31, 1996 1995 Property, plant and equipment, at cost $ 703.2 $ 717.8 Accumulated depreciation and amortization (400.5) (405.1) ------- ------- Property, plant and equipment, net $ 302.7 $ 312.7 ====== ====== ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, except per share data) Results of Operations The amounts in the table below were derived from the Consolidated Financial Statements. 1996 1995 Reported Reported Change Net sales $481.7 $434.1 11.0% Gross profit 130.3 125.3 4.0% Selling general and administrative expenses 102.0 77.6 31.4% Operating earnings 49.1 47.7 2.9% Interest expense, net 6.8 4.5 51.1% Net earnings 25.4 28.1 (9.6%) Earnings per share $0.51 $0.57 (10.5%) During the first quarter of 1996, the company recorded the following charges and gains in net earnings: Gain on Disposition: In January 1996, the company sold Kinney Vacuum Company ("Kinney"), a unit of the Process Controls sector, for approximately $29.0 million and recognized a pre-tax gain of approximately $21.0. Included in the gain was a LIFO liquidation of approximately $1.1 and transaction costs of approximately $0.5. Product Warranty: In March 1996, the company decided to correct defects in certain products sold in prior years in the Process Controls sector for which the warranty period had expired, and provided $4.0 to cover the cost of repairs. Management believes that this plan will help the company meet the expectations of its customers. It is anticipated that the amount accrued will be expended in 1996. Capitalized Software: Based on an assessment of future market potential made during the first quarter, the company decided to write off $4.6 of capitalized software for a product in the Industrial Technology sector. Factory Closure and Other: As part of the company's ongoing review of facilities, product lines and operations, the company decided in March 1996 to close a factory in the Electrical Controls sector and provided $4.7 primarily for lease termination costs, asset write-downs and severance. Management anticipates that the closure of this factory will result in lower costs in the future from improved productivity. Also in connection with this review, the company identified property, plant and equipment that will not be utilized in future operations and, therefore, recorded a $4.4 charge to write the assets off. Environmental: During the quarter, the company changed its estimate of costs to be incurred related to environmental matters at one of its Electrical Controls sector facilities. The additional accrual of $2.0 was made based on additional information received about the method and extent of remediation required. To facilitate a more meaningful comparison, the charges and gains discussed above have been excluded from the following discussion of results of operations. 1996 1995 Change Adjusted(1) Reported Net sales $481.7 $434.1 11.0% Gross profit 143.3 125.3 14.4% Margin 29.7% 28.9% Selling general and administrative expenses 95.3 77.6 22.8% Percent of Sales 19.8% 17.9% Operating earnings 48.0 47.7 0.6% Interest expense 6.8 4.5 51.1% Net earnings 24.7 28.1 (12.1%) Earnings per share $0.50 $0.57 (12.3%) (1) Excludes gain on sale of Kinney, product warranty costs, write-offs of capitalized software and other assets, factory closure costs and environmental charges. Net Sales: Sales improved 11.0 percent over 1995 levels due primarily to acquisitions of Best Power Technology Inc. ("Best Power") and MagneTek Electric Inc. ("Waukesha Electric") in 1995. International sales in 1996 totaled approximately 22 percent of the company's net sales. Export sales increased approximately 5 percent and foreign sales increased approximately 38 percent, primarily reflecting the European sales of Best Power. Process Control sector sales decreased 1.4 percent to $173.1, due mainly to the disposition of Kinney which generated revenues of $6.3 in the first quarter of 1995. This decline was partially offset by increased shipments of crystal growing furnaces. Sales in the Electrical Controls sector increased 39.0 percent to $222.6, substantially all of which was due to the addition of Best Power and Waukesha Electric. Stronger domestic demand for life safety products was offset by lower volume caused by a major floor care customer's production curtailments. Industrial Technology sector sales decreased 12.6 percent to $86.0. The completion of the U.S. Postal Service stamp vending machine contract and other large farebox contracts in the first quarter of 1995, as well as declines in the OEM bicycle and automotive component products were the primary reasons for the decline. Gross Profit: Gross profit as a percentage of sales improved from 28.9 percent to 29.7 percent. Higher margins at Best Power as well as improved cost structures at several operating units were the primary reasons for the improvement. Margin improvements were strongest for mixer, coal feeder, electrical fitting and valve products. Selling, general and administrative expenses: Selling, general and administrative expenses as a percentage of sales increased from 17.9 percent to 19.8 percent primarily due to higher operating expenses-to-sales at Best Power, as well as lower credits in connection with the settlement of insured matters. Included in selling, general and administrative expenses were pension credits of $2.7 in 1996 and $2.2 in 1995. Operating earnings: Operating earnings for the Process Controls sector decreased 1.8 percent to $21.7 due primarily to the sale of Kinney. This amount was partially offset by stronger sales of crystal growing furnaces and the absence of low margin jobs in the mixer business that were reported in the first quarter of 1995. Electrical Controls sector operating earnings increased 72.8 percent to $21.6 due to the 1995 acquisitions of Best Power and Waukesha Electric. Improved productivity in the fittings business was offset by lower volume in the motors and emergency lighting businesses. The Industrial Technology sector operating earnings decreased 28.0 percent to $11.8 primarily as a result of lower sales volume. During 1996, the settlement of insured matters increased earnings of Process Controls and Electrical Controls by $0.5 and $0.9, respectively. During 1995, cash settlements (primarily for royalty and insured matters) increased earnings of Electrical Controls by $1.8 and Industrial Technology by $2.0, and reduced unallocated expenses by $1.9. Unallocated expenses increased from $3.3 in the first quarter of 1995 to $7.1 in the same period in 1996 as a result of the $1.9 of items disclosed in the preceding paragraph and an increase in corporate activities, partially offset by headcount reductions in certain departments. Interest expense: Net interest expense increased 51.1 percent to $6.8 from the higher average debt levels that resulted from the acquisitions of Best Power and Waukesha Electric, partially offset by lower average interest rates. Net earnings were $24.7 or $0.50 per share in 1996 compared to $28.1 million or $0.57 per share in 1995. The company's effective tax rate is 40.0 percent in 1996 compared to 35.0 percent in the first quarter of 1995. The increase was due to an increase in non-deductible goodwill, and deferred tax valuation allowance reductions recorded in the prior year. Financial Condition-March 31, 1996 Compared to December 31, 1995 Operations in the first quarter of 1996 provided cash of $47.1 reflecting strong working capital management. Expenditures for previously divested operations, restructuring activities and severance pay totaled $11.3 in the first quarter of 1996. These expenditures were charged against accruals. Proceeds from the disposition of businesses in 1996 totaled $71.8. In the first quarter of 1996, the company expended $11.4 for capital expenditures and paid $11.8 in dividends. Debt repayments, net of borrowings, aggregated $83.5. Long-term debt-to-total capitalization was 36.8 percent at March 31, 1996 reduced from 42.6 percent at year-end, reflecting the use of proceeds generated from dispositions to pay down debt. At March 31, 1996, the company had deferred tax assets of $215.5 that were reduced by deferred tax liabilities of $107.2 and a valuation allowance of $33.6. The valuation allowance is based on management's assessment that 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, $1.0 of such benefits would reduce goodwill. The company is well-positioned to finance future working capital requirements and capital expenditures through current earnings and significant available credit facilities. Other Matters Since the company is a producer of capital goods and equipment, its results 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 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. Forward-looking Statements: The company may from time to time make projections concerning future operations and earnings. The company's forward-looking statements are based on the company's current expectations, which are subject to a number of risks and uncertainties that could materially affect or reduce such operations and earnings. In addition to the general factors identified in "Other Matters" above, the primary factors that could specifically affect the company's expectations include the failure of: (1) a continuation of the increased order rate experienced in the first quarter, (2) productivity improvements meeting or exceeding budget, and (3) new products under development being produced and accepted as anticipated. PART II: OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders of the Registrant (the "Meeting") was held on April 18, 1996. (b) The Registrant solicited proxies for the Meeting pursuant to Regulation 14; there was no solicitation in opposition to management's nominees for directors as listed in the Proxy Statement, and all such nominees were elected. (c) In addition to the election of directors, the shareholders ratified the appointment of auditors, and approved the General Signal Corporation 1996 Stock Incentive Plan. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 12.0 Calculation of Ratios of Earnings to Fixed Charges. 27 Financial Data Schedule - March 1996 (EDGAR filing only) 27 Financial Data Schedule - March 1995 (EDGAR filing only) (b) No reports were filed on Form 8-K. 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: April 19, 1996 EX-12 2 Calculation of Ratios of Earnings to Fixed Charges General Signal Corporation (Dollars in millions) Exhibit (12.0) Quarter Ended March 31, Year Ended December 31, 1996 1995 1994 1993 1992 1991 Earnings: Earnings from continuing operations before income taxes and extraordinary items $42.3 $156.4 $160.3 $139.1 $ 9.5 $97.4 Add: Fixed charges 9.1 34.7 20.2 22.6 35.3 39.3 ----- ------ ----- ------ ------ ----- $51.4 $191.1 $180.5 $161.7 $44.8 $136.7 Fixed charges: Interest Expense (Gross) $7.4 $27.7 $14.4 $18.0 $28.6 $31.8 One-third of rent expense 1.7 7.0 5.8 4.6 6.7 7.5 ----- ----- ----- ----- ----- ----- $9.1 $34.7 $20.2 $22.6 $35.3 $39.3 ----- ----- ----- ----- ----- ----- Ratio 5.65 5.51 8.94 7.15 1.27 3.48 ==== ===== ===== ===== ===== ==== EX-27 3
5 1000000 3-MOS DEC-31-1996 MAR-31-1996 16 1 335 16 243 691 703 400 1568 449 349 0 0 78 520 1568 482 482 351 433 0 0 7 42 17 25 0 0 0 25 0.51 0.51
EX-27 4
5 1000000 3-MOS DEC-31-1995 MAR-31-1995 12 2 298 15 231 778 648 360 1421 332 330 0 0 78 512 1421 434 434 309 387 0 0 5 43 15 28 0 0 0 28 0.57 0.57
-----END PRIVACY-ENHANCED MESSAGE-----