-----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, AKgKWW5qXyyj4fjjUsgTGMbFEnPnS+POps+42TWzsAjxR9qwyeSR99q3pzQ/J8vX 7pCy39E8u1qjlMn01MsjTA== 0000040834-96-000012.txt : 19960725 0000040834-96-000012.hdr.sgml : 19960725 ACCESSION NUMBER: 0000040834-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960724 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] 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: 96598406 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 June 30, 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 (State or other jurisdiction of 16-0445660 incorporation or organization) (I.R.S. Employer 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 49,774,339 (Class) (Outstanding at July 16, 1996) PART I: FINANCIAL INFORMATION ITEM I: FINANCIAL STATEMENTS GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Statement of Earnings (In millions, except per share data) (Unaudited) Three Months Ended June 30, 1996 1995 Net sales $515.0 $446.3 Cost of sales 357.3 313.8 Selling, general and administrative expenses 99.4 82.2 Transaction and consolidation charges -- 7.4 ----- ----- 456.7 403.4 ----- ----- Operating earnings 58.3 42.9 Interest expense, net 5.6 5.1 Earnings from continuing operations ----- ----- before income taxes 52.7 37.8 Income taxes 21.1 13.2 ----- ----- Earnings from continuing operations 31.6 24.6 Discontinued operations -- (49.6) ----- ----- Net earnings $31.6 ($25.0) ===== ===== Earnings (loss) per share: Continuing operations $0.64 $0.50 Discontinued operations -- (1.01) ----- ----- Net earnings $0.64 ($0.51) ===== ===== Dividends declared per share $0.24 $0.24 ===== ===== Average shares outstanding 49.7 49.1 ===== ===== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Statement of Earnings (In millions, except per share data) (unaudited) Six Months Ended June 30, 1996 1995 Net sales $996.7 $880.4 Cost of sales 708.7 622.6 Selling, general and administrative expenses 201.4 159.9 Gain on disposition (20.8) -- Transaction and consolidation charges -- 7.4 ----- ----- 889.3 789.9 ----- ----- Operating earnings 107.4 90.5 Interest expense, net 12.4 9.6 ----- ----- Earnings before income taxes 95.0 80.9 Income taxes 38.0 28.3 ----- ----- Earnings from continuing operations 57.0 52.6 Discontinued operations -- (49.6) ----- ----- Net earnings $57.0 $3.0 ===== ===== Earnings (loss) per share: Continuing operations $1.15 $1.07 Discontinued operations -- (1.01) ----- ----- Net earnings $1.15 $0.06 ===== ===== Dividends declared per share $0.48 $0.48 ===== ===== Average shares outstanding 49.6 49.1 ===== ===== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION Balance Sheet (In millions) (Unaudited) June 30, December 31, Assets 1996 1995 Current assets: Cash and cash equivalents $14.0 $1.0 Accounts receivable 335.7 323.6 Inventories 245.2 234.7 Prepaid expenses and other current assets 21.3 30.1 Assets held for sale at estimated realizable value 17.2 60.4 Deferred income taxes 66.2 71.6 ----- ----- Total current assets 699.6 721.4 Property, plant and equipment 305.5 312.7 Intangibles 398.0 406.0 Other assets 161.4 161.6 Deferred income taxes 0.8 11.5 ----- ----- $1,565.3 $1,613.2 ======== ======== See accompanying notes to financial statements. June 30, December 31, Liabilities and Shareholders' Equity 1996 1995 Current liabilities: Short-term borrowings and current maturities of long-term debt $5.9 $9.0 Accounts payable 183.1 158.1 Accrued expenses 220.8 233.8 Income taxes 34.5 31.2 ----- ----- Total current liabilities 444.3 432.1 Long-term debt, less current maturities 329.5 428.6 Accrued postretirement and postemployment obligations 141.5 146.9 Other liabilities 24.7 27.5 ----- ----- Total long-term liabilities 495.7 603.0 Shareholders' equity: Common stock: authorized 150.0 shares; issued 64.4 shares at June 30, 1996 and 64.3 shares at December 31, 1995 78.0 77.9 Additional paid-in capital 309.8 304.2 Retained earnings 616.1 582.9 Cumulative translation adjustments (3.0) (3.9) Common stock in treasury, at cost: 14.7 shares at June 30, 1996 and 15.0 shares at December 31, 1995 (375.6) (383.0) ----- ----- Total shareholders' equity 625.3 578.1 ----- ----- $1,565.3 $1,613.2 ======== ======== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Statement of Cash Flow (In millions) (Unaudited) Six Months Ended June 30, 1996 1995 CASH FLOW FROM OPERATING ACTIVITIES: Earnings from continuing operations $57.0 $52.6 Adjustments to reconcile earnings to net cash from operating activities: Gain on disposition (20.8) -- Non-cash charges 19.7 -- Deferred taxes 15.7 4.0 Depreciation and amortization 34.9 29.6 Pension credits (4.8) (5.0) Other, net 5.9 4.7 Changes in working capital (19.2) (48.5) ----- ----- Net cash from operating activities 88.4 37.4 ----- ----- CASH FLOW FROM INVESTING ACTIVITIES: Divestitures 71.6 2.7 Acquisitions, net of cash acquired -- (182.2) Capital expenditures (28.6) (24.2) Other, net 0.6 (0.8) ----- ----- Net cash from investing activities 43.6 (204.5) ----- ----- CASH FLOW FROM FINANCING ACTIVITIES: Net change in short and long-term borrowings (102.2) 203.6 Dividends paid (23.9) (22.7) Proceeds from shares sold to employees 8.0 11.4 Shares repurchased (0.9) (9.9) ----- ----- Net cash from financing activities (119.0) 182.4 ----- ----- Net change in cash and cash equivalents 13.0 15.3 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1.0 0.3 ----- ----- CASH AND CASH EQUIVALENTS AT END OF PERIOD $14.0 $15.6 ===== ===== See accompanying notes to financial statements. GENERAL SIGNAL CORPORATION AND CONSOLIATED SUBSIDIARIES Notes to Financial Statements (Unaudited) 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 June 30, December 31, 1996 1995 (in millions) Finished goods $78.7 $73.9 Work in progress 65.8 66.5 Raw material and purchased parts 122.9 117.6 ----- ----- Total FIFO cost 267.4 258.0 Excess of FIFO cost over LIFO inventory value (22.2) (23.3) ----- ----- Net carrying value $245.2 $234.7 ====== ===== 3. Business Segment Information Three Months Ended June 30, 1996 1995 Net sales: (in millions) Process Controls $188.8 $186.3 Electrical Controls 234.7 169.9 Industrial Technology 91.5 90.1 ----- ----- $515.0 $446.3 ===== ===== Operating earnings: Process Controls $27.6 $26.0 Electrical Controls 23.9 7.6(a) Industrial Technology 15.7 14.7 ----- ----- Total operating earnings before unallocated expenses and interest 67.2 48.3 Net interest expense (5.6) (5.1) Unallocated expenses (8.9) (5.4) ----- ----- Earnings before income taxes $52.7 $37.8 ===== ===== (a) Includes a $7.4 charge primarily for severance and other consolidation costsrelated to the combination of General Signal and Best Power locations. 3. Business Segment Information Six Months Ended June 30, (continued) 1996 1995 (in millions) Net sales: Process Controls $361.9 $361.9 Electrical Controls 457.3 330.0 Industrial Technology 177.5 188.5 ----- ----- $996.7 $880.4 ====== ====== Operating earnings: Process Controls $66.1(a) $48.1 Electrical Controls 34.4(b) 20.1(d) Industrial Technology 22.9(c) 31.1 ----- ----- Total operating earnings before unallocated expenses and interest 123.4 99.3 Net interest expense (12.4) (9.6) Unallocated expenses (16.0) (8.8) ----- ----- Earnings before income taxes $95.0 $80.9 ===== ===== (a) Includes $20.8 of gain on disposition of Kinney Vacuum and a charge for product warranty costs. (b) Includes $11.1 charge related to plant closure costs, asset valuations and environmental costs. (c) Includes $4.6 charge for asset valuations. (d) Includes $7.4 charge primarily for severance and other consolidation costs related to the combination of General Signal and Best Power locations. 4. Property, Plant and Equipment June 30, December 31, 1996 1995 Property, plant and equipment, (in millions) at cost $714.1 $717.8 Accumulated depreciation and amortization (408.6) (405.1) ----- ----- Property, plant and equipment, net $305.5 $312.7 ===== ===== 5. Supplemental Information-Statement of Cash Flow Six Months Ended June 30, 1996 1995 Cash paid (received) for: (in millions) Interest $14.3 $8.3 ===== ===== Income taxes $18.2 $3.3 ===== ===== Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired $ - $234.4 Cash paid - (190.0) ----- ----- $ - $44.4 ===== ===== ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions, except per share data) Results of Operations - Second Quarter 1996 Compared With Second Quarter 1995 The amounts in the table below were derived from the Consolidated Financial Statements. In order to facilitate a more meaningful comparison of second quarter results, the amounts in the following table and discussion exclude the $7.4 Best Power transaction and consolidation charge recorded in the second quarter of 1995. 1996 1995 Reported Adjusted(1) Change Net sales $515.0 $446.3 15.4% Gross profit 157.7 132.5 19.0% Margin 30.6% 29.7% Selling general and administrative expenses 99.4 82.2 20.9% Percent of Sales 19.3% 18.4% Operating earnings 58.3 50.3 15.9% Interest expense, net5.65.19.8% Earnings from continuing operations 31.6 29.4 7.5% Earnings per share from continuing operations $0.64 $0.60 6.7% (1) Excludes transaction and consolidation charges related to the acquisition of Best Power. Net sales: Acquisitions of Best Power Technology Inc. ("Best Power") and MagneTek Electric Inc. ("Waukesha Electric") in June and July of 1995, respectively, contributed approximately 80 percent of the 15.4 percent increase in 1996 sales over 1995. Mixers, electrical fittings and pump products also contributed significantly to the increased volume. International sales in 1996 totaled approximately 22 percent of the company's net sales. Export sales increased approximately 13 percent and foreign sales increased approximately 9 percent, primarily reflecting the European sales of Best Power. Process Control sector sales increased 1.3 percent to $188.8 from increased domestic shipments of pumps and foreign shipments of mixers. This increase was partially offset by the disposition of Kinney Vacuum which generated revenues of $6.6 in the second quarter of 1995. Sales in the Electrical Controls sector increased 38.1 percent to $234.7, primarily due to addition of Best Power and Waukesha Electric. Higher demand for electrical fittings also contributed to the increase. Industrial Technology sector sales increased 1.6 percent to $91.5 due to strong order activity for telecommunication and OEM automotive products. This increase was partially offset by the completion of large farebox contracts and automotive recall programs in 1995. Gross profit: Gross profit as a percentage of sales improved from 29.7 percent to 30.6 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 mixers, electrical fittings, OEM automotive and coal feeder products. Gross profits in 1995 included $0.9 of LIFO reserve liquidations. Selling, general and administrative expenses: Selling, general and administrative expenses as a percentage of sales increased from 18.4 percent to 19.3 percent primarily due to the acquisition of Best Power which carries a higher rate of operating expenses, as well as lower credits in connection with the settlement of insured matters. Included in selling, general and administrative expenses were pension credits of $2.1 in 1996 and $2.8 in 1995. Operating earnings: Operating earnings for the Process Controls sector increased 6.2 percent to $27.6. Stronger sales of pumps and higher margin mixer products were partially offset by lower earnings due to the sale of Kinney and lower margin sales of laboratory equipment. Electrical Controls sector operating earnings increased 59.3 percent to $23.9, with higher margins of fittings products contributing significantly to the improvement along with the 1995 acquisitions of Best Power and Waukesha Electric. The Industrial Technology sector operating earnings increased 6.8 percent to $15.7 primarily as a result of higher sales volume, particularly in OEM automotive product markets. Unallocated expenses increased from $5.4 in the second quarter of 1995 to $8.9 in the same period in 1996 due primarily to $2.9 of accrual adjustments recorded in 1995. These adjustments related to the semiconductor equipment operations, environmental reserves and other accruals. Unallocated expenses also increased due to professional fees incurred in connection with legal settlements, higher compensation costs and other increases in corporate activities. 1996 unallocated expenses were positively impacted by the collection of a $1.3 previously written off receivable. Interest expense: Net interest expense increased 9.8 percent to $5.6 due to higher average debt levels resulting from the acquisitions of Best Power and Waukesha Electric, partially offset by lower average interest rates. Earnings from continuing operations were $31.6 or $0.64 per share in 1996 compared to $29.4 or $0.60 per share in 1995. The company's effective tax rate is 40.0 percent in 1996 compared to 35.0 percent in the second quarter of 1995. The increase in effective tax rate was due to an increase in non-deductible goodwill, and deferred tax valuation allowance reductions recorded in the prior year. Results of Operations - First Half 1996 Compared With First Half 1995 The amounts in the table below were derived from the Consolidated Financial Statements. 1996 1995 Reported Reported Change Net sales $996.7 $880.4 13.2% Gross profit 288.0 257.8 11.7% Selling, general and administrative expenses 201.4 159.9 26.0% Operating earnings 107.4 90.5 18.7% Interest expense, net 12.4 9.6 29.2% Earnings from continuing operations 57.0 52.6 8.4% Earnings per share from continuing operations 1.15 1.07 7.5% Earnings per share from discontinued operations -- (1.01) Net earnings per share $1.15 $0.06 >100% During the first six months of 1996 and 1995, the company included the following items in reported net earnings. To facilitate a more meaningful discussion of results of operations, these items are excluded from the discussion of comparative results of operations. Gain on disposition: In January 1996, the company sold Kinney Vacuum Company ("Kinney"), a unit of the Process Controls sector, for approximately $29.0 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 Process Control products that were sold in prior years and have warranty periods that have expired. The company provided $4.0 to cover the cost of needed 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 made during the first quarter of 1996 of future market potential, the company wrote 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 costs. 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 first quarter of 1996, 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 based on additional information received about the method and extent of remediation required. Transaction and consolidation charge: On June 14, 1995, the company completed a cash tender offer for Best Power. In connection therewith, the company recorded a $7.4 charge primarily for severance and other consolidation costs relating to the combination of General Signal and Best Power locations. Discontinued operations: The company adopted a plan to sell Leeds & Northrup Company ("L&N") in November 1994. During the second quarter of 1995, the company recorded net losses of $49.6 million ($1.01 per share) in connection with the divestiture of L&N. The following table summarizes results of operations of the first six months of 1996 and 1995 excluding the items discussed above. 1996 1995 Adjusted(1) Adjusted(2) Change Net sales $996.7 $880.4 13.2% Gross profit 301.0 257.8 16.8% Margin 30.2% 29.3% Selling, general and administrative expenses 194.7 159.9 21.8% Percent of Sales 19.5% 18.2% Operating earnings 106.3 97.9 8.6% Interest expense, net 12.4 9.6 29.2% Earnings from continuing operations 56.3 57.4 (1.9%) Earnings per share from continuing operations $1.14 $1.17 (2.6%) (1) Excludes gain on sale of Kinney, product warranty costs, write-offs of capitalized software and other assets, factory closure costs and environmental charges. (2) Excludes transaction and consoliation charges related to the acquisition of Best Power. Net Sales: Sales improved 13.2 percent over 1995 levels due primarily to the acquisitions of Best Power and Waukesha Electric in 1995. International sales in 1996 totaled approximately 22 percent of the company's net sales. Export sales increased approximately 9 percent and foreign sales increased approximately 22 percent, primarily reflecting the European sales of Best Power. Process Control sector sales improved 3.7 percent to $361.9 after excluding the impact of the disposition of Kinney Vacuum, which had sales of $12.9 during the first half of 1995. The higher sales came principally from increased shipments of pumps, mixers and crystal growing furnaces. Sales in the Electrical Controls sector increased 38.6 percent to $457.3, substantially all of which was due to the addition of Best Power and Waukesha Electric. Stronger demand for life safety products and electrical fittings also contributed to the improvement. Industrial Technology sector sales decreased 5.8 percent to $177.5. The completion of the U.S. Postal Service stamp vending machine contract, other large farebox contracts and several automotive recall programs in the first half of 1995 were the primary reasons for the decline. Gross profit: Gross profit as a percentage of sales improved from 29.3 percent to 30.2 percent. Higher margins at Best Power, in relation to other General Signal units, 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, and electrical fitting products. Gross profit in 1995 included $0.9 of LIFO reserve liquidations. Selling, general and administrative expenses: Selling, general and administrative expenses as a percentage of sales increased from 18.2 percent to 19.5 percent primarily due to the acquisition of Best Power, which carries higher operating expenses-to-sales, as well as lower credits in connection with the settlement of insured matters and accrual adjustments. Included in selling, general and administrative expenses were pension credits of $4.8 in 1996 and $5.0 in 1995. Operating earnings: Operating earnings for the Process Controls sector increased 2.5 percent to $49.3. Higher margin jobs in the mixer business contributed to the improvement, along with stronger sales of pumps and crystal growing furnaces. Offsetting these improvements were lower earnings due to the sale of Kinney, and lower margins for laboratory products. Electrical Controls sector operating earnings increased 65.5 percent to $45.5 due primarily to the 1995 acquisitions of Best Power and Waukesha Electric. Improved productivity in the fittings business also contributed to the improvement but was partially offset by lower volume in the motors business. The Industrial Technology sector operating earnings decreased 11.6 percent to $27.5 primarily as a result of lower sales volume. During 1996, the settlement of insured matters increased the earnings of Process Controls and Electrical Controls by $0.7 and $1.3, respectively. 1996 unallocated expenses also were positively impacted by the collection of a $1.3 previously written off receivable. During 1995, cash settlements (primarily for royalty and insured matters) increased the earnings of Electrical Controls by $1.8 and Industrial Technology by $2.0, and reduced unallocated expenses by $1.9. 1995 unallocated expenses were also positively impacted by $2.9 of accrual adjustments related to the semiconductor equipment operations, environmental reserves and other accruals. Unallocated expenses increased from $8.8 in the first half of 1995 to $16.0 in the same period in 1996. The difference is due to the items disclosed in the preceding paragraph, professional fees incurred in connection with legal settlements, along with increases in compensation expense and other corporate activities. Interest expense: Net interest expense increased 29.2 percent to $12.4 due to higher average debt levels resulting from the acquisitions of Best Power and Waukesha Electric, partially offset by lower average interest rates. Earnings from continuing operations were $56.3 or $1.14 per share in 1996 compared to $57.4 or $1.17 per share in 1995. The company's effective tax rate is 40.0 percent in 1996 compared to 35.0 percent in the first half of 1995. The increased tax rate is due to an increase in non-deductible goodwill and reductions in the deferred tax valuation allowance recorded in the prior year. Financial Condition-June 30, 1996 Compared to December 31, 1995 The following information was derived from the condensed statement of cash flow. It summarizes the cash flow activity for the first half of 1996 compared to the first half of 1995. 1996 1995 Cash flow from continuing operations $106.7 $81.3 Expenditures for previously divested operations (18.3) (33.2) Cash flow from operating activities 88.4 37.4 Acquisitions, primarily Best Power - - (182.2) Disposition of discontinued operations and Kinney Vacuum 71.6 2.7 Capital expenditures (28.6) (24.2) Cash flow from investing activities 43.6 (204.5) Debt repayments, net of borrowings (102.2) 203.6 Dividends (23.9) (22.7) Cash flow from financing activities $(119.0) $182.4 Cash flow from continuing operations improved primarily from higher earnings, after adjustment for non-cash items, and improved working capital management. Long-term debt-to-total capitalization was 34.5 percent at June 30, 1996 reduced from 42.6 percent at year-end, reflecting the use of proceeds generated from dispositions and higher cash from operations to pay down debt. The company is well positioned to finance future working capital requirements and capital expenditures through current earnings and available credit facilities. At June 30, 1996, the company had deferred tax assets of $293.8 that were reduced by deferred tax liabilities of $193.2 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. 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 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. 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 half, (2) productivity improvements meeting or exceeding budget, and (3) new products under development being produced and accepted as anticipated. 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 April 15, 1996 related to issuance of medium-term notes. 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: July 23, 1996 EX-12 2 Calculation of Ratios of Earnings to Fixed Charges General Signal Corporation (Dollars in millions) Exhibit (12.0) Six Months Ended June 30, Year Ended December 31, 1996 1995 1994 1993 1992 1991 Earnings: Earnings from continuing operations before income taxes and extraordinary items $95.0 $156.4 $160.3 $139.1 $9.5 $97.4 Add: fixed charges 16.6 34.7 20.2 22.6 35.3 39.3 ----------------------------------------------- $111.6 $191.1 $180.5 $161.7 $44.8 $136.7 Fixed charges: Interest expense (gross) $13.2 $27.7 $14.4 $18.0 $28.6 $31.8 One-third of rent expense 3.4 7.0 5.8 4.6 6.7 7.5 ------------------------------------------------ $16.6 $34.7 $20.2 $22.6 $35.3 $39.3 ----------------------------------------------- Ratio 6.72 5.51 8.94 7.15 1.27 3.48 =============================================== EX-27 3
5 1000 6-MOS DEC-31-1996 JUN-30-1996 13981 90 352604 16867 245181 699512 714124 408608 1565313 444247 329511 0 0 77977 547339 1565313 996732 996732 708722 889345 0 0 12372 95015 38007 57008 0 0 0 57008 1.15 0
EX-27 4
5 1000 6-MOS DEC-31-1995 JUN-30-1995 15645 2409 320783 16519 246059 810865 687216 379310 1645393 402374 508729 0 0 77765 481000 1645393 880432 880432 622636 789932 0 0 9594 80906 28282 52624 (49600) 0 0 3024 .06 0
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