-----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, MTLcVgHJGHildCIR69g8RPPliGiMvD/P2Gedp73lmJT3XCUWSnfcTWUGXgX3UZUd c7Z99yAcUhcbmoMeKXoIfQ== 0000720032-94-000011.txt : 19940613 0000720032-94-000011.hdr.sgml : 19940613 ACCESSION NUMBER: 0000720032-94-000011 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIGGIE INTERNATIONAL INC /DE/ CENTRAL INDEX KEY: 0000720032 STANDARD INDUSTRIAL CLASSIFICATION: 7381 IRS NUMBER: 521297376 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08591 FILM NUMBER: 94532956 BUSINESS ADDRESS: STREET 1: 4420 SHERWIN RD CITY: WILLOUGHBY STATE: OH ZIP: 44094 BUSINESS PHONE: 2169532700 MAIL ADDRESS: STREET 2: 4420 SHERWIN RD CITY: WILLOUGHBY STATE: OH ZIP: 44094 FORMER COMPANY: FORMER CONFORMED NAME: FIGGIE INTERNATIONAL HOLDINGS INC DATE OF NAME CHANGE: 19870112 10-Q/A 1 FORM 10-Q FIRST QUARTER 1994 PLEASE NOTE: THIS IS NOT AN AMENDED FILING. WE ARE SUBMITTING THIS FILING BECAUSE OUR ORIGINAL EDGAR FILING WAS TRUNCATED DURING SUBMISSION. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ending March 31, 1994 Commission file number 1-8591 FIGGIE INTERNATIONAL INC. (Exact name of Registrant as specified in its charter)
Delaware 52-1297376 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4420 Sherwin Road, Willoughby, Ohio 44094 (Address of principal executive offices) (Zip Code)
(216) 953-2700 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at May 19, 1994 Class A Common Stock, par value $.10 per share 13,672,445 Class B Common Stock, par value $.10 per share 4,943,495
Total number of pages contained in this report 18. 2
FIGGIE INTERNATIONAL INC. INDEX Page No. PART I. FINANCIAL INFORMATION Consolidated Statements of Income with Selected Consolidating Data For the Three Months Ending March 31, 1994 and 1993 3 Consolidated Balance Sheets with Selected Consolidating Data March 31, 1994 and December 31, 1993 4 - 5 Consolidated Statements of Cash Flow For the Three Months Ending March 31, 1994 and 1993 6 Notes to Consolidated Financial Statements 7 - 9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 14 PART II. OTHER INFORMATION 15 EXHIBIT LIST 16 EXHIBIT 99 17 - 18
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDING MARCH 31, 1994 AND 1993 (in thousands of dollars except for per share data) (U N A U D I T E D) Consolidated Consolidated 1994 1993 SALES AND OTHER INCOME FROM CONTINUING OPERATIONS: Net Sales $ 181,406 $ 181,068 Other income/(expense) (2,668) 2,113 Total sales and other income 178,738 183,181 COSTS AND EXPENSES FROM CONTINUING OPERATIONS: Cost of sales 152,274 133,331 Selling, general, and administrative expenses 45,677 35,497 Bad debt expense 604 519 Interest expense, net 10,821 8,635 Restructuring charges 547 5,705 Total costs and expenses 209,923 183,687 MINORITY INTEREST 18 0 INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE PROVISION FOR TAXES ON INCOME (31,167) (506) PROVISION FOR TAXES ON INCOME FROM CONTINUING OPERATIONS: Federal income taxes/(benefits) (10,246) (128) State income taxes/(benefits) (584) (13) NET INCOME/(LOSS) BEFORE DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES (20,337) (365) NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS 0 4,179 NET INCOME/(LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES (20,337) 3,814 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES 0 5,839 NET INCOME/(LOSS) $ (20,337) $ 9,653 WEIGHTED AVERAGE SHARES 17,855,702 17,598,831 EARNINGS (LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS $ (1.14) $ (0.02) EARNINGS (LOSS) PER COMMON SHARE FROM DISCONTINUED OPERATIONS $ 0.00 $ 0.24 EARNINGS PER COMMON SHARE FROM CHANGE IN ACCOUNTING FOR INCOME TAXES $ 0.00 $ 0.33 EARNINGS (LOSS) PER COMMON SHARE ON NET INCOME $ (1.14) $ 0.55 COMMON DIVIDENDS DECLARED CLASS A $ 0.00 $ 0.125 CLASS B $ 0.00 $ 0.125 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1994 AND DECEMBER 31, 1993 (in thousands of dollars) (U N A U D I T E D) Consolidated Consolidated Mar 31, 1994 Dec 31, 1993 ASSETS Current Assets: Cash and cash equivalents $ 4,961 $ 6,833 Marketable securities 63,935 27,314 Trade accounts receivable, less allowance for uncollectible accounts of $1,676 at 3/31/94 and $1,376 at 12/31/93 143,268 144,287 Finance receivables 4,146 5,715 Inventories 123,917 126,142 Prepaid expenses 19,543 16,499 Recoverable income taxes 1,317 36,283 Net assets related to discontinued operations 163,734 170,435 Total current assets 524,821 533,508 PROPERTY, PLANT, AND EQUIPMENT: Land and land improvements 51,597 52,272 Buildings and leasehold improvements 92,052 91,130 Machinery and equipment 163,128 155,071 Rental equipment 41,889 39,800 Oil and gas properties 48,285 47,901 396,951 386,174 Accumulated depreciation and amortization (137,612) (131,589) 259,339 254,585 Property under capital leases, less accumulated amortization of $12,736 at 3/31/94 and $14,825 at 12/31/93 10,577 12,540 Net property, plant, and equipment 269,916 267,125 OTHER ASSETS: Investments in affiliates 10,345 10,321 Patents 1,398 1,425 Goodwill 58,163 58,532 Prepaid pension costs 11,217 10,591 Other 95,186 96,959 Long-term finance receivables 14,788 19,942 Total Assets $ 985,834 $ 998,403 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1994 AND DECEMBER 31, 1993 (in thousands of dollars) (U N A U D I T E D) Consolidated Consolidated Mar 31, 1994 Dec 31, 1993 LIABILITIES Current Liabilities: Notes payable $ 115,818 $ 90,891 Current maturities of long-term debt 109,328 109,674 Accounts payable 91,808 113,900 Accrued salaries and wages 16,613 14,910 Other accrued expenses 78,185 69,822 Insurance loss reserves 6,834 6,752 Accrued federal income taxes 0 0 Long-term debt classified as current 275,606 270,952 Total current liabilities 694,192 676,901 LONG-TERM DEBT 61,008 64,666 DEFERRED FEDERAL INCOME TAXES 12,914 20,604 OTHER LONG-TERM LIABILITIES 34,807 32,563 Total Liabilities 802,921 794,734 MINORITY INTEREST 429 435 STOCKHOLDERS' EQUITY Preferred stock 0 0 Common stock 1,869 1,874 Capital surplus 126,694 127,488 Retained earnings 103,803 124,020 Unearned compensation (28,380) (31,003) Cumulative translation adjustment (19,818) (18,956) Unrealized loss on investments (1,684) (189) Total stockholders' equity 182,484 203,234 Total liabilities and stockholders' equity $ 985,834 $ 998,403 SUPPLEMENTAL STOCK INFORMATION Shares Outstanding at Mar 31, 1994 Dec 31, 1993 Preferred Stock - Authorized Shares 3,217,495 - - Common Stock A - Authorized Shares 18,000,000 13,703,131 13,750,863 Common Stock B - Authorized Shares 18,000,000 4,988,507 4,988,507 Par Value of Outstanding Shares 1994 1993 Preferred Stock - $1.00 par value $ - $ - Common Stock A - $0.10 par value 1,370,313 1,375,086 Common Stock B - $0.10 par value 498,851 498,851 $1,869,164 $1,873,937 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDING MARCH 31, 1994 AND 1993 (in thousands of dollars) 1994 1993 Cash flows from operating activities: Loss from continuing operations $ (20,337) $ (365) Income from discontinued operations 0 4,179 Cumulative effect of accounting change 0 5,839 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 8,538 8,918 Amortization of ESOP unearned compensation 1,620 126 Other, net (2,184) (3,871) Changes in assets and liabilities, net of effects from purchase of businesses- (Increase) decrease in trade accounts receivables (9,165) (10,349) Increase (decrease) in allowance for doubtful accounts 146 (54) (Increase) decrease in finance receivables 6,673 (3,973) (Increase) decrease in inventories (7,717) (29,980) (Increase) decrease in prepaid expenses (2,837) (3,103) (Increase) decrease in prepaid pension cost (398) (372) (Increase) decrease in other assets (368) (9,425) Increase (decrease) in accounts payable (20,474) 13,688 Increase (decrease) in accrued expenses 8,305 10,609 Increase (decrease) in deferred and accrued taxes 29,170 452 Increase (decrease) in insurance loss reserves 1,343 (376) Increase (decrease) in other long-term liabilities 1,545 (1,572) Increase (decrease) in unearned premiums (75) 1,502 Net cash provided (used) by operating activities (6,215) (18,127) Cash flows from investing activities: Capital expenditures (12,330) (16,956) Payment for purchases of businesses and investments, net of cash acquired (24) (2,260) Proceeds from sale of property, plant, and equip. 2,655 21,927 Proceeds from sale of discontinued operations 25,648 0 (Purchases) sales of marketable securities, net (38,027) 1,407 Net cash provided (used) in investing activities (22,078) 4,118 Cash flows from financing activities: Proceeds from long-term debt 671 12,710 Principal payments on long-term debt (2,101) (15,091) Net borrowing under notes payable, net of effects from purchases of businesses 27,121 21,277 Dividends paid 0 (2,296) Common stock transactions, net (142) (3,401) Net cash provided by (used by) financing activities 25,549 13,199 Net (decrease) in cash and equivalents (2,744) (810) Cash and equivalents at beginning of year 10,131 14,613 Cash and equivalents at MARCH 31 $ 7,387 $ 13,803 - Continuing operations $ 4,961 $ 6,833 - Discontinued operations $ 2,426 $ 6,970 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7 FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1994 and 1993 The summarized financial information included herein has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and properly reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present a fair statement of the financial results for the periods covered by this report. The results of operations for the three months ending March 31, 1994 are not necessarily indicative of the results to be expected for the entire year. (1) Significant Accounting and Reporting Policies: The Company's summarized financial information for the three months ending March 31, 1994 and 1993, included in this Form 10-Q Report, has been prepared in accordance with the accounting policies described in Note 1 of the Notes to Consolidated Financial Statements appearing in Figgie International Inc.'s Form 10-K for the year ending December 31, 1993. While Company management believes the procedures followed in preparing this summarized financial data are reasonable under the circumstances, the accuracy of the amounts are in some respects dependent upon facts that will exist, and procedures that will be performed by the Company, later in the fiscal year. (2)Inventories: Inventories are stated at the lower of cost or market and include cost of material, labor and overhead. The first-in, first-out method of inventory accounting is used in the determination of cost of sales. The Company generally takes physical inventories of its raw materials, work in process and finished goods between September 30 and December 31. Management believes the cost of taking physical inventories more frequently would considerably exceed the benefits. Accordingly, the amounts shown for inventories at March 31, 1994 have been determined under the Company's regular accounting system, and management believes that no significant adjustments will arise when the next physical inventories are taken. It is impractical to segregate inventories into major classes due to the nature of the items and the businesses carried on by the Company and its subsidiaries. (3)Federal Income Taxes: The Company provides for Federal income taxes for interim reporting purposes using applicable statutory tax rates and considering available tax credits. Effective January 1, 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes. The effect of adopting SFAS 109 was to increase first quarter 1993 net income $5.8 million. 8 Notes to Consolidated Financial Statements - continued (4) Commitments and Contingent Liabilities: As reported under Item 3 "Legal Proceedings" in the Company's Form 10-K Annual Report for the fiscal year ending December 31, 1993, the Company appealed to the United States Court of Appeals for the Ninth Circuit from a Federal District Court's summary judgement against the Company in a suit brought by the Federal Trade Commission seeking consumer redress in connection with the sale of heat detectors manufactured by the Company's Interstate Engineering division. In a Per Curiam opinion filed on May 7, 1993, the Court of Appeals affirmed in part and vacated in part the judgement of the District Court. The Court of Appeals held that the District Court had committed error in ordering the Company to pay a minimum amount of approximately $7,600,000 but held that the Company could be required to pay refunds to those buyers who, after notification, can make a valid claim for redress. The Company's subsequent petition for a writ of certiorari to the United States Supreme Court was denied and the Company is working with the Federal Trade Commission to implement a redress program. In a class action suit filed on April 18, 1994 in the U.S. District Court for the Northern District of Ohio against the Company and two former officers and directors, the plaintiff stockholder alleged that the defendants disseminated false and misleading information to the investing public concerning the Company's business, management, financial condition, and future prospects in violation of Section 10(b) and 20(a) of the Securities Exchange Act of 1934. A separate class action suit was filed by another stockholder on May 11, 1994, in the same court against the Company, certain former and present officers and directors, and the Company's auditing firm, setting forth similar allegations. Both suits seek monetary damages and costs. The Company and certain of its subsidiaries are defendants in various other lawsuits arising in the ordinary course of business. In the opinion of Company management, the outcome of the litigation will not have a material effect on the operations or financial position of the Company. Costs incurred by the Company in the performance of U.S. Government contracts are subject to audit. In the opinion of management, the final settlement of these costs will not result in significant adjustments to recorded amounts. (5) Reclassification of Amounts: Certain amounts for 1993 have been reclassified to reflect comparability with account classifications for 1994. 9 Notes to Consolidated Financial Statements - continued (6) Discontinued Operations: In December of 1993, the Company instituted a divestiture plan as part of its debt restructuring efforts to dispose of certain businesses through unrelated sales transactions. These entities represent separate major lines of business, class of customers, or non-reportable business segments and, accordingly, have been treated as discontinued operations as required by generally accepted accounting principles. As a result of this treatment, the accompanying consolidated financial statements have been reclassified to report separately the net assets and operating results of the following operations: Rawlings Sporting Goods, Sherwood-Drolet Corp. Ltd., Advance Security, American Lafrance, Safety Supply America, Medical Devices, Huber/Essick/Mayco Pump, Cardinal Casualty Co., Colony Insurance Co., Hamilton Insurance Co., Waite Hill Services. Net assets of the discontinued operations at March 31, 1994 and December 31, 1993 consisted primarily of accounts receivable, inventory and machinery and equipment, offset by insurance loss reserves related to the insurance companies. As a group, the discontinued operations represented sales volumes of $90.4 million for the first three months of 1994 compared to sales of $100.7 million for the same period in 1993, and are excluded from the reported sales amounts. Net income from discontinued operations includes provisions for federal and state taxes at the statutory rates for the applicable period. No provision for loss on disposal of discontinued operations has been provided as the Company expects its divestiture plan to result in a net gain. During the first quarter of 1994, the Company sold Advance Security to a privately held corporation. (7) Liquidity and Restructuring Plans: As a result of 1993 operating results, the Company was not in compliance as of March 31, 1994 and December 31, 1993 with certain financial covenants contained in certain debt agreements, which permit its lenders to accelerate the due date on its debt. However, the Company has subsequently received temporary waivers with respect to those financial covenants. Since permanent waivers or modifications of these covenants have not been obtained, $276 million and $271 million of long-term debt has been classified as current for the periods ended March 31, 1994 and December 31, 1993, respectively. The Company is currently negotiating with banks party to its revolving credit facility, other domestic and foreign banks, and other financial institutions in an effort to finalize a satisfactory restructuring of its debt. The Company has continued to receive temporary waivers from its banks. The latest series of waivers granted to the Company will expire at the end of May, 1994. 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Consolidated net sales in the first three months of 1994 were $181.4 million, which is $338 thousand more than net sales of $181.1 million reported in the first three months of 1993. Other Expense for the first three months of 1994 was $2.7 million versus Other Income of $2.1 million for the same period last year. 1993 contained a $2.7 million recovery on a cancelled mask contract with the U.S. government, while 1994 reflected $1.9 million in losses on sales of assets. Costs of goods and services were $152.3 million (83.9% to sales) in the first three months of 1994 versus $133.3 million (73.6% to sales) during the same period in 1993. The major reasons for these variances to prior year are: (1) increased R&D expenses of approximately $1.0 million for new product development at Scott Aviation, Fire Protection and Snorkel; (2) continued volume and production problems at Packaging Systems and Hartman of approximately $7.3 million, which are only now expected to begin to show the effects of cost reduction efforts; (3) the revised accounting practices adopted 12/31/93 of expensing project costs and world class conversion costs as incurred of approximately $2.3 million; (4) expenses associated with the pre-production costs of several new products of $2.6 million; and (5) a correction to contract cost estimates at Automatic Sprinkler of approximately $2.9 million. Selling and General and Administrative expenses were $45.7 million or 25.2% to sales for the first three months of 1994 versus $35.5 million or 19.6% to sales in 1993. Selling expenses were generally flat with the prior period. General and Administrative expenses are up $10.5 million of which $7.5 million is directly attributed to legal and professional fees as a result of the debt restructuring and the defense of two stockholder derivative lawsuits filed in 1993. Interest expense of $10.8 million for the first three months of 1994 was $2.1 million more than that of the first three months of 1993 due to an increase in debt as well as an increase in variable interest rates. As of 12/31/93, the Company reported restructuring costs associated with the modernization of production facilities, equipment, and support systems of $51.0 million, $8.8 million, and $5.9 million for the years 1993, 1992, and 1991, respectively. The Company completed the major portions of this conversion in prior years; however, some work is still continuing. Charges reflected in the first three months of 1994 are $547 thousand when compared to $5.7 million for the same period last year. 11 Results of Operations - continued The loss from continuing operations before provisions for taxes amounted to $31.2 million in the first three months of 1994 versus a loss of $506 thousand for the same period in 1993. Income from discontinued operations for the first three months of 1994, including the gain on the sale of Advance Security, is being deferred on the balance sheet per generally accepted accounting principles. The Company expects overall gains on the disposal of the discontinued operations and, therefore, no provisions for losses are required. The sale of Advance Security is being concluded and the Company has also received a letter of intent for the purchase of Safety Supply America. In addition, there has also been significant activity with all of the other discontinued units. Rawlings Sporting Goods has filed an S-1 Registration Statement in preparation for an initial public offering and is also actively engaged in negotiations with private buyers. Numerous inquiries have also been received on the remaining units which are all expected to result in purchase offers.
The Company's segment sales for the first three months of 1994 and 1993 are stated below: Sales to Unaffiliated Customers (in thousands except for percents) Three Months Ending March 31 1994 Over Percent 1994 1993 (Under)1993Over (Under) Consumer $ 15,900 $ 16,501 $ (601) (3.6%) Industrial Fire Protection/Safety/ Security 46,577 49,605 (3,028) (6.1%) Machinery & Allied Products 67,038 65,914 1,124 1.7% Total Industrial 113,615 115,519 (1,904) (1.6%) Technical 44,771 43,662 1,109 2.5% Services 7,120 5,386 1,734 32.2% Total Sales $ 181,406 $ 181,068 $ 338 0.2%
The Consumer Products segment's net sales were $15.9 million during the first three months of 1994 versus net sales of $16.5 million during the same period in 1993. Reduced sales and selling prices from Fred Perry due primarily to the deepening European recessions continues to be the major reason for the declines in this segment. Spain and Germany continue to show very slow recovery, while the U.K. is starting to show some signs of improvement. Increased sales volumes at Interstate Engineering (up 8%) and at Taylor Environment (up 17%) have partially offset the declines at Fred Perry. 12 Results of Operations - continued Fire Protection/Safety/Security Product segment's net sales declined $3.0 million or 6.1% during the first three months of 1994 when compared to net sales for the same period last year. Increased sales volumes from Scott health and safety products and from the Fire Protection division were more than offset by sales declines at Automatic Sprinkler. The non- residential construction market that require fire protection systems continues to be very soft and is a primary factor affecting Automatic Sprinkler. The Machinery and Allied Products segment's net sales were $67.0 million for the first three months of 1994 versus $65.9 million for the same period last year. The weak European economy and the closing of selected facilities has had an adverse effect on the sales of material handling equipment. Several large distribution orders, earthquake related work in Los Angeles, and several industrial maintenance contracts are responsible for increased sales of scaffolding products. Increased sales of elevating work platforms also contributed to this segment's overall sales growth. The Technical Products segment's net sales were $44.8 million for the first three months of 1994 versus $43.7 million for the same period last year. This increase in sales is primarily due to increased shipments of Interstate Electronics' Global Positioning Systems. The Service segment's net sales for the first three months of 1994 were $7.1 million versus sales of $5.4 million for the same period in 1993. This change is due primarily to increased volume at the Financial Services subsidiary which involves an increase in the vehicle fleet as well as increases in equipment financing.
The Company's segment operating income for the first three months of 1994 and 1993 are stated below: Operating Profits (in thousands except for percents) Three Months Ending March 31 1994 Over Percent 1994 1993 (Under)1993Over (Under) Consumer $ 1,514 $ 1,024 $ 490 47.9% Industrial Fire Protection/Safety/ Security (1,236) 2,882 (4,118) (142.9%) Machinery & Allied Products (638) 4,365 (5,003) (114.6%) Total Industrial (1,874) 7,247 (9,121) (125.9%) Technical (2,380) 6,320 (8,700) (137.7%) Services 464 1,172 (708) (60.4%) Total Segments (2,276) 15,763 (18,039) (114.4%) General Corporate Expenses(18,088) (7,634) (10,454) (136.9%) Interest Expense, Net (10,821) (8,635) (2,186) (25.3%) Income before Taxes on Income $ (31,185) $ (506)$ (30,679) (6063.1%)
13 Results of Operations - continued The Consumer Products segment's operating profits for the first three months of 1994 were $1.5 million versus profits of $1.0 million for the same period in 1993. The increase in profits is due partially to better performance at Fred Perry as a result of cost reduction efforts. In addition, Fred Perry experienced sales of substandard quality merchandise and seasonal items in 1993 which occurred at a significantly reduced rate in 1994. Fire and Safety Products segment operating losses were $1.2 million for the first three months of 1994 compared to operating profits of $2.9 during the same period in 1993. The drop in profits is due primarily to Automatic Sprinkler's volume drop, heavy competition among contractors for fewer jobs, and a correction of contract cost estimates. The Machining and Allied Products segment operating loss was $.6 million for the first three months of 1994 versus operating income of $4.4 million for the same period in 1993. Sales volume reductions and machinery conversion costs at Packaging Systems are primarily responsible for the decline. Cost reduction efforts have been implemented and we expect to see these results in the future reporting periods. Insurance proceeds from the flood damage at Snorkel Economy have still not been received, but a settlement is expected in the near future. The Technical Products segment operating loss was $2.4 million for the first three months of 1994 versus an operating income of $6.3 for the same period in 1993. A volume reduction at Scott Aviation and mask contract recovery proceeds in 1993 contribute to the change in profits year over year. Continued production problems at Hartman also contributed to reduced profits; however, cost reduction efforts have been implemented and are expected to result in future improvements. The Services segment operating profits were $.5 million for the first three months of 1994 compared to $1.2 million for the same period in 1993. The decline in profits is due primarily to a decline in oil prices at the Natural Resources division. General corporate expenses during the first three months of 1994 were $18.1 million or $10.5 million over those of the same period last year. The increase in Corporate expenses is primarily due to a $7.5 million increase in legal and professional fees as a direct result of debt restructuring and defense of two stockholder derivative lawsuits. Interest expense is up $2.2 million over the prior year due to an increase in debt as well as an increase in variable interest rates. The effective income tax benefit from continuing operations is 34.7% in the first three months of 1994 versus a 27.9% tax benefit during the same period last year. 14 Liquidity and Capital Commitments The Company continues to operate under temporary waivers from its lenders in lieu of compliance with loan requirements. In the absence of the finalization of a new long-term financing package, the Company is required under generally accepted accounting principles to classify substantially all of its long-term debt as a current liability at March 31, 1994 and December 31, 1993. The Company is continuing to negotiate with banks party to its revolving credit facility, other domestic and foreign banks, and other financial institutions in an effort to obtain a satisfactory restructuring of its debt. As part of its restructuring plan, the Company intends to dispose of certain businesses under a divestiture plan designed to provide liquidity to the Company and pay down debt through the use of proceeds upon sale. During the first quarter, the Advance Security Division was sold and proceeds retained as marketable securities for debt paydown when an agreement is reached with the banks. During the three months ending March 31, 1994, the Company increased its debt by $25.5 million, realized a recovery of taxes, net of payments, of $29.2 million, sold businesses and equipment of $28.3 million which, along with depreciation and amortization of $10.1 million and liquidation of $6.7 million of finance receivables, were used to purchase marketable securities of $38.0 million, increase key working capital (accounts receivable and inventory net of accounts payable) by $37.4 million, make capital expenditures of $12.3 million and fund a net operating loss of $20.3 million. The Company's ability to continue to meet its liquidity requirements is dependent upon its ability to successfully complete its restructuring efforts - specifically, finalizing a new long-term financing package and completion of its divestiture program. The Company continues to make progress in implementing actions aimed at restoring profitability and liquidity. Negotiations with certain of the Company's lenders continue to take place in an effort to finalize a restructuring of its debt facilities. 15 PART II. OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS In two separate suits reported in the Company's 1993 Form 10-K Annual Report, three stockholders of the Company filed derivative complaints during 1993 in the Common Pleas Court of Lake County, Ohio seeking recovery on behalf of the Company for alleged self- dealing, waste of corporate assets, financial statement over- statements, gross mismanagement and participation or acquiescence in such practices by Directors of the Company, all of whom were named as defendants. The Court consolidated the two suits and subsequently dismissed them with respect to all defendants. The plaintiffs have filed a Notice of Appeal. See also Footnote (4) of Notes to Consolidated Financial Statements. ITEM 3 DEFAULTS UPON SENIOR SECURITIES See Note (7) Liquidity and Restructuring Plans of Notes to Consolidated Financial Statements. ITEM 5 OTHER INFORMATION A press release is attached as Exhibit 99. ITEM 6(a) EXHIBITS Exhibit 99 - Press Release dated May 18, 1994. ITEM 6(b) REPORTS ON FORM 8-K 8-K filed March 17, 1994. Item 7(c) Exhibit. 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 hereunto duly authorized.
FIGGIE INTERNATIONAL INC. Date: May 23, 1994 /s/ A. C. Hays (Principal financial and accounting officer for purposes of this report) Date: May 23, 1994 /s/ L. A. Harthun Senior Vice President-International, General Counsel and Secretary
EX-99.1(DESCRIPTION> 2 1 EXHIBIT LIST 99 - Press Release dated May 18, 1994. EX-99 3 PRESS RELEASE 1 EXHIBIT 99 Keith Mabee (216)953-2810 FOR IMMEDIATE RELEASE FIGGIE INTERNATIONAL'S CHAIRMAN AND CEO RETIRES; VANNOY NAMED SUCCESSOR; BOARD INITIATES CEO SEARCH AND NEW STANDING COMMITTEES WILLOUGHBY, OH, MAY 18, 1994 -- Figgie International Inc. (NASDA/NMS: FIGIA AND FIGI) today announced that its founder, Chairman and CEO Harry E. Figgie, Jr. is retiring and will be succeeded by Vice Chairman Walter M. Vannoy in the Company's two top leadership posts. Mr. Figgie also resigned from the Board. Mr. Figgie informed the Company's Board of Directors that: "In light of my recent health difficulties, and after 30 years at the helm, it is time for me to step aside so that I can spend more time with my family and my wide-ranging personal interests, and in order to facilitate a timely CEO succession as the Company prepares itself for the future." The Board acknowledged "Mr. Figgie's many contributions to the growth and development of the Company over the three decades he led its diversification into a major Fortune 500 company." Mr. Vannoy, who has served as a Company director since 1981, was named vice chairman in February and had previously served as vice chairman of McDermott International, Inc. and president and chief operating officer of its Babcock and Wilcox subsidiary. "I am deeply committed to leading Figgie International through the strategic and management transition that the Board has embarked upon," stated Mr. Vannoy. "We intend to build a strong leadership team and a people- and results- driven organization that can carry a more sharply focused core of businesses to renewed and consistent profitability and growth." 2 In related actions, the Figgie Board of Directors: -Launched a comprehensive search for "an exceptional chief executive officer candidate with a strong track record" who would be brought in to join the senior management team; -Established three new standing committees of the Board: Strategic Planning; Management Development and Compensation; and Operations, the latter which will oversee implementation of the Company's major modernization and automation programs; -Intensified its efforts to develop a long-term strategic focus consistent with optimizing shareholder returns over time; and -Accepted the resignation of Dr. Harry E. Figgie, III, as a director of the Company. Dr. Figgie, who had earlier resigned as an officer of the Company, cited expanded business commitments at the Figgie family-owned Clark- Reliance Corporation and his father's departure from Figgie International as the key factors underlying his decision to resign from the Board. "We are very appreciative of the consistently strong support provided by our customers, employees, banks, trade creditors and investors as we manage through these dynamic changes that will position us for a more promising future," noted Mr. Vannoy. -----END PRIVACY-ENHANCED MESSAGE-----