<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-13279
UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
21900 BURBANK BOULEVARD
WOODLAND HILLS, CALIFORNIA 91367-7418
WWW.UNOVA.COM (Zip Code)
(Address of principal executive
offices and internet site)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 992-3000
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 [ ]
On July 31, 2000 there were 55,938,760 shares of Common Stock outstanding,
exclusive of treasury shares.
Page 1 of 15
<PAGE> 2
UNOVA, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations (unaudited)
Six months ended June 30, 2000 and 1999.................. 3
Consolidated Statements of Operations (unaudited)
Three Months Ended June 30, 2000 and 1999................. 4
Consolidated Balance Sheets (unaudited)
June 30, 2000 and December 31, 1999 ...................... 5
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 2000 and 1999................... 6
Notes to Consolidated Financial Statements (unaudited)..... 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K............................. 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales and Service Revenues ................... $ 965,059 $ 987,831
------------ ------------
Costs and Expenses
Cost of sales and service ................ 733,271 703,335
Selling, general and administrative ...... 204,404 221,436
Depreciation and amortization ............ 34,832 32,714
Interest, net ............................ 15,781 19,005
------------ ------------
Total Costs and Expenses ............... 988,288 976,490
------------ ------------
Other Income, Net ............................ 40,186
------------
Earnings before Taxes on Income .............. 16,957 11,341
Taxes on Income .............................. (1,187) (4,536)
------------ ------------
Net Earnings ................................. $ 15,770 $ 6,805
============ ============
Basic and Diluted Earnings per Share ......... $ 0.28 $ 0.12
============ ============
Shares Used in Computing Basic
Earnings per Share ....................... 55,555,421 54,944,359
Shares Used in Computing Diluted
Earnings per Share ....................... 55,555,676 54,947,033
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Sales and Service Revenues .................. $ 480,232 $ 494,431
------------ ------------
Costs and Expenses
Cost of sales and service ............... 369,886 351,026
Selling, general and administrative ..... 106,789 111,768
Depreciation and amortization ........... 17,813 16,131
Interest, net ........................... 8,169 9,923
------------ ------------
Total Costs and Expenses .............. 502,657 488,848
------------ ------------
Other Income, Net ........................... 40,186
------------
Earnings before Taxes on Income ............. 17,761 5,583
Taxes on Income ............................. (1,497) (2,233)
------------ ------------
Net Earnings ................................ $ 16,264 $ 3,350
============ ============
Basic and Diluted Earnings per Share ........ $ 0.29 $ 0.06
============ ============
Shares Used in Computing Basic
Earnings per Share ...................... 55,558,069 54,945,613
Shares Used in Computing Diluted
Earnings per Share ...................... 55,558,578 54,950,064
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
UNOVA, INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Current Assets
Cash and cash equivalents .................................... $ 7,059 $ 25,239
Accounts receivable, net ..................................... 472,040 596,885
Inventories, net of progress billings ........................ 263,430 310,175
Deferred tax assets .......................................... 159,100 158,170
Other current assets ......................................... 21,911 19,873
----------- -----------
Total Current Assets ...................................... 923,540 1,110,342
----------- -----------
Property, Plant and Equipment, at Cost ............................ 462,448 472,229
Less Accumulated Depreciation ..................................... (212,768) (201,330)
----------- -----------
Property, Plant and Equipment, Net ........................... 249,680 270,899
----------- -----------
Goodwill and Other Intangibles, Net ............................... 378,295 399,131
----------- -----------
Other Assets ...................................................... 130,332 123,167
----------- -----------
Total Assets ...................................................... $ 1,681,847 $ 1,903,539
=========== ===========
</TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Current Liabilities
Accounts payable and accrued expenses ........................ $ 332,513 $ 509,188
Payroll and related expenses ................................. 83,795 89,309
Notes payable and current portion of long-term obligations ... 14,316 64,002
----------- -----------
Total Current Liabilities ................................. 430,624 662,499
----------- -----------
Long-term Obligations ............................................. 365,317 365,386
----------- -----------
Deferred Tax Liabilities .......................................... 47,457 44,777
----------- -----------
Other Long-term Liabilities ....................................... 96,006 99,577
----------- -----------
Commitments and Contingencies......................................
Shareholders' Investment
Common stock ................................................. 559 556
Additional paid-in capital ................................... 655,820 652,157
Retained earnings ............................................ 107,030 91,260
Accumulated other comprehensive loss -
cumulative currency translation adjustment ................ (20,966) (12,673)
----------- -----------
Total Shareholders' Investment ............................ 742,443 731,300
----------- -----------
Total Liabilities and Shareholders' Investment .................... $ 1,681,847 $ 1,903,539
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
UNOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period ................ $ 25,239 $ 17,708
--------- ---------
Cash Flows from Operating Activities:
Net earnings ............................................... 15,770 6,805
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Gain on sale of business ................................ (44,686)
Depreciation and amortization ........................... 34,832 32,714
Change in prepaid pension costs, net .................... (8,258) (8,554)
Deferred taxes .......................................... (1,880) (10,326)
Proceeds from the sale of accounts receivable ........... 82,000
Changes in operating assets and liabilities:
Accounts receivable ................................... 108,254 (13,530)
Inventories ........................................... 33,038 30,342
Other current assets .................................. 6,166 2,645
Accounts payable and accrued expenses ................. (176,430) (87,814)
Payroll and related expenses .......................... (7,480) (6,721)
Other operating activities .............................. (5,273) 5,722
--------- ---------
Net Cash Provided by (Used in) Operating Activities ... (45,947) 33,283
--------- ---------
Cash Flows from Investing Activities:
Proceeds from sale of business ............................. 88,000
Capital expenditures ....................................... (19,376) (35,220)
Other investing activities ................................. 6,350 9,044
--------- ---------
Net Cash Provided by (Used in) Investing Activities ... 74,974 (26,176)
--------- ---------
Cash Flows from Financing Activities:
Net decrease in notes payable and credit facilities ........ (49,776) (16,731)
Other financing activities ................................. 2,569 3,189
--------- ---------
Net Cash Used in Financing Activities ................. (47,207) (13,542)
--------- ---------
Resulting Decrease in Cash and Cash Equivalents ................. (18,180) (6,435)
--------- ---------
Cash and Cash Equivalents at End of Period ...................... $ 7,059 $ 11,273
========= =========
Supplemental disclosure of cash flow information:
Interest paid .............................................. $ 16,161 $ 19,885
Income taxes paid (refunded) ............................... $ 2,844 $ (274)
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
UNOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. UNOVA, Inc. and subsidiaries ("UNOVA" or the "Company") became an
independent public company on October 31, 1997 (the "Distribution
Date"), when all of the UNOVA common stock was distributed to holders of
common stock of Western Atlas Inc. ("WAI"), in the form of a dividend
(the "Distribution"). Every WAI shareholder of record on October 24,
1997 was entitled to receive one share of UNOVA common stock for each
WAI share of common stock held.
The amounts included in this report are unaudited; however in the
opinion of management, all adjustments necessary for a fair presentation
of results of operations, financial position and cash flows for the
stated periods have been included. These adjustments are of a normal
recurring nature. It is suggested that these consolidated financial
statements be read in conjunction with the audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1999. The results of operations for the
interim periods presented are not necessarily indicative of operating
results for the entire year.
2. Inventories, net of progress billings consisted of the following
(thousands of dollars):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Raw materials and work in process ...... $ 272,357 $ 289,656
Finished goods ......................... 28,002 44,336
Less progress billings ................. (36,929) (23,817)
--------- ---------
Inventories, net of progress billings .. $ 263,430 $ 310,175
========= =========
</TABLE>
3. Interest, net was composed of the following (thousands of dollars):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest expense ...... $ 16,977 $ 19,519 $ 8,592 $ 9,931
Interest income ....... (1,196) (514) (423) (8)
-------- -------- -------- --------
Interest, net ......... $ 15,781 $ 19,005 $ 8,169 $ 9,923
======== ======== ======== ========
</TABLE>
4. Basic earnings per share is calculated using the weighted average number
of common shares outstanding and issuable for the applicable period.
Diluted earnings per share is computed using basic weighted average
shares plus the dilutive effect of outstanding stock options using the
"treasury stock" method.
7
<PAGE> 8
UNOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. (continued)
Shares used for basic and diluted earnings per share were computed as
follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic weighted average shares ...... 55,555,421 54,944,359 55,558,069 54,945,613
Dilutive effect of stock options ... 255 2,674 509 4,451
---------- ---------- ---------- ----------
Diluted weighted average shares .... 55,555,676 54,947,033 55,558,578 54,950,064
========== ========== ========== ==========
</TABLE>
At June 30, 2000 and 1999, Company employees and directors held options
to purchase 5,502,620 and 3,957,100 shares, respectively, of Company
common stock that were antidilutive to the diluted earnings per share
computation. These options could become dilutive in future periods if
the average market price of the Company's common stock exceeds the
exercise price of the outstanding options.
5. The Company's comprehensive income (loss) amounts were computed as
follows (thousands of dollars):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings ........................... $ 15,770 $ 6,805 $ 16,264 $ 3,350
Change in equity due to foreign
currency translation adjustments .... (8,293) (7,965) (5,659) (3,854)
-------- -------- -------- --------
Comprehensive income (loss) ............ $ 7,477 $ (1,160) $ 10,605 $ (504)
======== ======== ======== ========
</TABLE>
6. The Company operates in two primary businesses: Automated Data Systems
("ADS") and Industrial Automation Systems ("IAS"). The IAS businesses
are further disaggregated into two reportable segments based on their
respective markets: Integrated Production Systems and Advanced
Manufacturing Equipment. The Company uses operating profit, which is
defined as earnings before taxes on income and net interest expense, to
evaluate performance.
Corporate and other amounts include corporate operating costs and
currency transaction gains and losses. There were no material
intersegment transactions.
8
<PAGE> 9
UNOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. (continued)
(Millions of Dollars)
<TABLE>
<CAPTION>
Integrated Advanced
Automated Production Manufacturing Corporate
Data Systems Systems Equipment and Other Total
------------ ---------- ------------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended June 30:
Sales ........................ 2000 $399.0 $429.7 $136.4 $965.1
1999 418.4 413.6 155.8 987.8
Operating profit (loss) ...... 2000 22.4(a) 23.4 3.5 $(16.6) 32.7
1999 10.3 32.7 1.5 (14.2) 30.3
Three Months Ended June 30:
Sales ........................ 2000 189.4 222.5 68.3 480.2
1999 210.4 210.6 73.4 494.4
Operating profit (loss) ...... 2000 18.0(a) 15.3 1.2 (8.6) 25.9
1999 2.7 20.8 (0.5) (7.5) 15.5
</TABLE>
(a) includes net other income of $40.2 million
7. The Company leases executive offices that are located in a building
owned by the UNOVA Master Trust, an entity which holds the assets of the
Company's primary U.S. pension plans. Rental expense under the
provisions of this lease was $0.5 million and $0.3 million for the six
and three month periods ended June 30, 2000, respectively. Rental
expense for the six and three month periods ended June 30, 1999 was $0.4
million and $0.2 million, respectively.
8. Net other income of $40.2 million is comprised of a one-time gain from
the sale of the ADS segment's Amtech transportation systems operations
("Amtech"), partially offset by severance charges related to the ADS
segment's North American manufacturing activities.
In June 2000, the Company sold Amtech and received preliminary cash
proceeds of approximately $88 million. The net assets and results of
operations of Amtech are not material to the Company's consolidated
financial statements for all periods presented.
9. During the second quarter of 2000 the Company significantly reduced its
annual effective tax rate to reflect the recognition of expected tax
benefits from previously incurred losses.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates in two primary businesses: Automated Data Systems ("ADS")
and Industrial Automation Systems ("IAS"). The IAS businesses are further
disaggregated into two reportable segments based on their respective markets:
Integrated Production Systems ("IPS") and Advanced Manufacturing Equipment
("AME"). Sales and service revenues and segment operating profit (loss) for the
six and three months ended June 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
-------------------------- ------------------------------
(thousands of dollars) (thousands of dollars)
<S> <C> <C> <C> <C>
Sales and Service Revenues
Automated Data Systems ................. $ 399,018 $ 418,426 $ 189,465 $ 210,441
Industrial Automation Systems:
Integrated Production Systems ....... 429,686 413,561 222,516 210,615
Advanced Manufacturing Equipment .... 136,355 155,844 68,251 73,375
--------- --------- --------- ---------
Total Sales and Service Revenues ....... $ 965,059 $ 987,831 $ 480,232 $ 494,431
========= ========= ========= =========
Segment Operating Profit (Loss)
Automated Data Systems ................. $(17,788)(a) $ 10,315 $ (22,219)(a) $ 2,665
Industrial Automation Systems:
Integrated Production Systems ....... 23,425 32,716 15,312 20,816
Advanced Manufacturing Equipment .... 3,510 1,462 1,243 (520)
--------- --------- --------- ---------
Segment Operating Profit (Loss) ........ $ 9,147 $ 44,493 $ (5,664) $ 22,961
========= ========= ========= =========
(a) excludes net other income of $40,186
</TABLE>
Sales and Service Revenues and Segment Operating Profit
Total sales and service revenues for the six months ended June 30, 2000 were
$965.1 million, a decrease of $22.8 million, or 2%, from the corresponding prior
year period. Total segment operating profit of $9.1 million for the six months
ended June 30, 2000 represents a decrease of $35.3 million, or 79%, compared to
the corresponding prior year period.
For the three months ended June 30, 2000, total sales and service revenues of
$480.2 million represents a decrease of $14.2 million, or 3%, compared with the
corresponding prior year quarter. For the three months ended June 30, 2000, the
Company reported a total segment operating loss of $5.7 million compared to
total segment operating profit of $23.0 million for the corresponding prior year
quarter.
Automated Data Systems: ADS segment revenues decreased $19.4 million, or 5%, for
the six months ended June 30, 2000, and $21.0 million, or 10%, for the three
months ended June 30, 2000, compared to the corresponding prior year periods.
The sales decline was caused primarily by continuing weakness in the Direct
Store Delivery (DSD) market and sales force disruption as the Company's Intermec
subsidiary shifts from a geographic sales orientation to a
named-account/vertical marketing structure. As a result of its 1999 ERP system
issues and current sales force disruption, Intermec has not participated in its
overall market growth. For the six and three month periods ended June 30, 2000,
ADS reported segment operating losses of $17.8 million and $22.2 million,
respectively, compared to segment operating profit of $10.3 million and $2.7
million in the corresponding prior year periods. The significant operating loss
for the 2000 second quarter was primarily a result of lower sales volume which
contributed less margin to cover reduced overhead and selling, general and
administrative expenses.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Integrated Production Systems: IPS segment revenues increased $16.1 million, or
4%, and $11.9 million, or 6%, for the six and three month periods ended June 30,
2000, respectively, compared to the corresponding prior year periods. Strong
domestic activity for the segment's engineering and design products and
precision grinding systems was the primary contributor to revenue growth for the
first half of 2000. Domestic revenue growth was partially offset by declines in
foreign sales due to weakness in UK markets. Related operating profit decreased
$9.3 million, or 28%, for the six months ended June 30, 2000, and $5.5 million,
or 26%, for the three months ended June 30, 2000 compared with the corresponding
prior year periods. The IPS operating profit decline was attributed to operating
losses incurred at foreign operations due to unabsorbed costs. IPS backlog
decreased from $627.7 million at December 31, 1999 to $546.8 million at June 30,
2000 due to an increase in project delays by automotive customers. The Company
believes that the decline in backlog may indicate an overall softness in its
automotive related markets.
Advanced Manufacturing Equipment: AME segment revenues decreased $19.5 million,
or 13%, and $5.1 million, or 7%, for the six and three month periods ended June
30, 2000, compared to the corresponding prior year periods, respectively. The
decrease in revenues reflects continued weakness in the general machine tool
market. AME reported operating profit of $3.5 million for the six months ended
June 30, 2000, compared to $1.5 million for the corresponding prior year period.
For the 2000 second quarter, AME reported operating profit of $1.2 million
compared to an operating loss of $0.5 million for the second quarter of 1999.
AME achieved marginal operating profits, despite the revenue decline, due to
1999 headcount reductions and cost structure improvements. AME backlog decreased
from $102.5 million at December 31, 1999 to $81.5 million at June 30, 2000.
Costs and Expenses
Cost of sales increased $30.0 million to $733.3 million for the six months ended
June 30, 2000 from $703.3 million for the six months ended June 30, 1999. Cost
of sales increased $18.9 million to $369.9 million for the three months ended
June 30, 2000 from $351.0 million for the three months ended June 30, 1999. Cost
of sales as a percentage of sales increased to 76% and 77% for the six and three
month periods ended June 30, 2000, respectively, from 71% in each of the
corresponding periods in the prior year due to the above-mentioned factors
contributing to fluctuations in revenue and operating profit.
Selling, general and administrative expenses ("SG&A") decreased $17.0 million to
$204.4 million for the six months ended June 30, 2000, from $221.4 million for
the six months ended June 30, 1999. SG&A decreased $5.0 million to $106.8
million for the three months ended June 30, 1999, from $111.8 million for the
three months ended June 30, 1999. The decrease in SG&A was due primarily to the
decline in sales from the prior year. SG&A as a percentage of sales was 21% and
22% for the six and three months periods ended June 30, 2000, respectively. For
the six and three months periods ended June 30, 1999, SG&A as a percentage of
sales was 22% and 23%, respectively.
Depreciation and amortization expense increased to $34.8 million and $17.8
million for the six and three months ended June 30, 2000 from $32.7 million and
$16.1 million for the corresponding periods in the prior year due to an increase
in the machinery and equipment component of fixed assets.
Net interest expense was $15.8 million and $19.0 million for the six months
ended June 30, 2000 and 1999, respectively, and $8.2 million and $9.9 million
for the three months ended June 30, 2000 and 1999, respectively. The decrease
was attributable to lower outstanding debt during the six months and three
months ended June 30, 2000 as compared to the same periods in 1999, partially
offset by the effect of increased interest rates.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Other Income, Net
Net other income of $40.2 million is comprised of a one-time gain from the sale
of the ADS segment's Amtech transportation systems operations ("Amtech"),
partially offset by severance charges related to the ADS segment's North
American manufacturing activities.
In June 2000, the Company sold Amtech and received preliminary cash proceeds of
approximately $88 million. The net assets and results of operations of Amtech
are not material to the Company's consolidated financial statements for all
periods presented.
Taxes on Income
During the second quarter of 2000 the Company significantly reduced its annual
effective tax rate to reflect the recognition of expected tax benefits from
previously incurred losses.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities decreased to $7.1 million at June 30, 2000 from
$25.2 million at December 31, 1999.
Total debt decreased to $379.6 million at June 30, 2000 from $429.4 million at
December 31, 1999. Proceeds from the sale of Amtech were used to reduce
outstanding debt incurred for the normal capital expenditures and working
capital needs of the company.
The Company maintains two unsecured committed variable-rate credit facilities
with banks from which it may borrow up to $500.0 million. Outstanding
borrowings under these facilities were $150.0 million at June 30, 2000.
The Company sells interests in a revolving pool of its trade accounts receivable
to a financial institution which issues short-term debt backed by receivables
acquired in similar transactions. At June 30, 2000 and December 31, 1999 net
proceeds of $100.0 million have been reflected as a reduction of accounts
receivable on the consolidated balance sheet. Costs associated with the asset
securitization agreements are $3.3 million for the six months ended June 30,
2000 and $1.7 million for the three months ended June 30, 2000 and are
classified as selling, general and administrative expenses.
During the second quarter of 2000, the Company engaged Credit Suisse First
Boston to analyze and advise management on strategic alternatives to accelerate
value generation for the Company's stakeholders.
The Company believes that cash flow from operations, along with available
borrowing capacity, will be adequate to meet anticipated working capital and
capital expenditure requirements for the next 12 months.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In June 2000, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101B, Second Amendment - Revenue Recognition in Financial
Statements, that defers the effective date of Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements, until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The Company
believes the adoption of SAB 101 will not have a material impact on its revenue
recognition practices.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133
(an amendment of FASB Statement No. 133). Under the provisions of this
statement, the effective date of Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.
133"), is deferred to fiscal years beginning after June 15, 2000. The Company is
currently evaluating the impact of adopting SFAS No. 133.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that included in this quarterly report are certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements are based on management's beliefs as well as on
assumptions made by and information currently available to management. They
include, but are not limited to, statements about market outlook, the Company's
ability to meet its working capital and capital expenditure requirements, future
available borrowing capacity, the impact of new accounting pronouncements, and
the Company's ability to implement any strategic alternatives it may choose to
accelerate value generation for its stakeholders. Such forward-looking
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions which could cause the Company's future results to
differ materially from those expressed or implied in any forward-looking
statements made by, or on behalf of, the Company. This report should be read in
conjunction with the Company's Annual Report on Form 10-K which contains a
fuller discussion of such risks, uncertainties, and assumptions. Readers are
cautioned not to place undue reliance on forward-looking statements. The Company
disclaims any obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: No reports on Form 8-K have been filed by the
Registrant during the quarter ended June 30, 2000.
(b) See Exhibit Index included herein on page E-1.
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SIGNATURE
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.
UNOVA, INC.
(Registrant)
By /s/ Michael E. Keane
---------------------------------
Michael E. Keane
Senior Vice President and
Chief Financial Officer
August 10, 2000
15
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UNOVA, INC.
INDEX TO EXHIBITS
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EXHIBIT NO. DESCRIPTION OF EXHIBIT
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2.1 Amended and Restated Purchase and Sale Agreement dated August 20,
1998, between UNOVA, Inc., UNOVA Industrial Automation Systems,
Inc., and UNOVA UK Limited, on the one hand, and Cincinnati
Milacron Inc., on the other hand, filed on October 2, 1998 as
Exhibit 2 to the Company's Current Report on Form 8-K, and
incorporated herein by reference.
3.1 Certificate of Incorporation of UNOVA, Inc., filed on October 22,
1997 as Exhibit 3A to Amendment No. 2 to the Company's
Registration Statement on Form 10 No. 001-13279, and incorporated
herein by reference.
3.2 By-laws of UNOVA, Inc., as amended on February 5, 1999, filed as
Exhibit 3.2 to the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty Trust
Company of New York, as Agent (the "$400,000,000 Credit
Agreement"), filed on October 1, 1997 as Exhibit 10M to Amendment
No. 1 to the Company's Registration Statement on Form 10 No.
001-13279, and incorporated herein by reference.
4.2 Amendment No. 1 to the $400,000,000 Credit Agreement, dated
January 15, 1998, filed as Exhibit 4.4 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
4.3 Amendment No. 2 to the $400,000,000 Credit Agreement, dated May
15, 1998, filed as Exhibit 4.7 to the Company's June 30, 1998
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.4 Amendment No. 3 to the $400,000,000 Credit Agreement, dated
September 24, 1998, filed as Exhibit 4.8 to the Company's
September 30, 1998 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
4.5 Amendment No. 4 to the $400,000,000 Credit Agreement dated
November 24, 1999, filed as Exhibit 4.5 to the Company's 1999
Annual Report on Form 10-K, and incorporated herein by reference.
4.6 Rights Agreement dated September 24, 1997, between UNOVA, Inc.
and The Chase Manhattan Bank, as Rights Agent, to which is
annexed the form of Right Certificate as Exhibit A, filed on
October 22, 1997 as Exhibit 3C to Amendment No. 2 to the
Company's Registration Statement on Form 10 No.
001-13279, and incorporated herein by reference.
4.7 Indenture dated as of March 11, 1998 between the Company and The
First National Bank of Chicago, Trustee, providing for the
issuance of securities in series, filed as Exhibit 4.5 to the
Company's 1997 Annual Report on Form 10-K, and incorporated
herein by reference.
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INDEX TO EXHIBITS (CONTINUED)
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4.8 Form of 6.875% Notes due March 15, 2005 issued by the Company
under such indenture, filed as Exhibit 4.6 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
4.9 Form of 7.00% Notes due March 15, 2008 issued by the Company
under such indenture, filed as Exhibit 4.7 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by reference.
4.10 $100,000,000 Credit Agreement dated January 13, 1999, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty Trust
Company of New York, as Agent, filed as Exhibit 4.9 to the
Company's 1998 Annual Report on Form 10-K, and incorporated
herein by reference.
4.11 Amended and Restated Credit Agreement (364 Day Agreement), among
UNOVA, Inc., the banks listed therein, and Morgan Guaranty Trust
Company of New York, as agent, dated December 1, 1999, filed as
Exhibit 4.11 to the Company's 1999 Annual Report on Form 10-K,
and incorporated herein by reference.
Instruments defining the rights of holders of other long-term
debt of the Company are not filed as exhibits because the amount
of debt authorized under any such instrument does not exceed 10%
of the total assets of the Company and its consolidated
subsidiaries. The Company hereby undertakes to furnish a copy of
any such instrument to the Commission upon request.
4.12 Transfer and Administration Agreement dated June 18, 1999, among
Enterprise Funding Corporation, as Company, KCH Funding, L.L.C.,
as Transferor, UNOVA, Inc., Individually and as Servicer, and
Nationsbank, N.A., as Lead Arranger, Agent and Bank Investor (the
"Transfer and Administration Agreement"), filed as Exhibit 4.10
to the Company's June 30, 1999 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
4.13 Amendment No. 1 to the Transfer and Administration Agreement
dated September 15, 1999, filed as Exhibit 4.13 to the Company's
1999 Annual Report on Form 10-K, and incorporated herein by
reference.
4.14 Amendment No. 2 to the Transfer and Administration Agreement
dated December 15, 1999, filed as Exhibit 4.14 to the Company's
1999 Annual Report on Form 10-K, and incorporated herein by
reference.
4.15 Amendment No. 3 to the Transfer and Administration Agreement
dated June 16, 2000.*
4.16 Receivables Purchase Agreement dated June 18, 1999, between
UNOVA, Inc., as Seller, and KCH Funding, L.L.C., as Purchaser
(the "Receivables Purchase Agreement"), filed as Exhibit 4.11 to
the Company's June 30, 1999 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
4.17 Amendment No.1 to the Receivable Purchase Agreement dated
December 15, 1999, filed as exhibit 4.16 to the Company's 1999
Annual Report on Form 10-K, and incorporated herein by reference.
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INDEX TO EXHIBITS (CONTINUED)
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4.18 Originator Receivables Purchase Agreement dated June 18, 1999,
among UNOVA Industrial Automation Systems, Inc. and Intermec
Technologies Corporation, as Sellers, and UNOVA, Inc., as
Purchaser, filed as Exhibit 4.12 to the Company's June 30, 1999
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
10.1 Distribution and Indemnity Agreement dated October 31, 1997,
between Western Atlas Inc. and UNOVA, Inc, filed as Exhibit 10.1
to the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.2 Tax Sharing Agreement dated October 31, 1997, between Western
Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.2 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.3 Employee Benefits Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.3 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.4 Intellectual Property Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.4 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.5 Form of Change of Control Employment Agreements with Alton J.
Brann, Michael E. Keane, Larry D. Brady and certain other
officers of the Company, filed as Exhibit 10.5 to the Company's
September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.6 Amendment to the Form of Change of Control Employment Agreements
with Alton J. Brann, Larry D. Brady, Michael E. Keane and certain
other officers of the Company, filed as Exhibit 10.6 to the
Company's 1999 Annual Report on Form 10-K, and incorporated
herein by reference.
10.7 Form of Change of Control Employment Agreement with certain
officers of the Company, filed as Exhibit 10.7 to the Company's
1999 Annual Report on Form 10-K, and incorporated herein by
reference.
10.8 UNOVA, Inc. Director Stock Option and Fee Plan, filed as Exhibit
10.7 to the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.9 Amendment No. 1 to the UNOVA, Inc. Director Stock Option and Fee
Plan filed as Exhibit 10.13 to the Company's September 30, 1999
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
10.10 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as Exhibit
10I to the Company's Registration Statement on Form 10 No.
001-13279 and incorporated herein by reference.
10.11 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on
October 1, 1997 as Exhibit 10H to Amendment No. 1 to the
Company's Registration Statement on Form 10 No. 001-13279 and
incorporated herein by reference.
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INDEX TO EXHIBITS (CONTINUED)
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10.12 Amendment No. 1 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated September 23, 1998, filed as Exhibit 10.22 to the
Company's September 30, 1998 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.13 Amendment No. 2 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated March 11, 1999, filed as Exhibit 10.15 to the
Company's 1998 Annual Report on Form 10-K, and incorporated
herein by reference.
10.14 Amendment No. 3 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated March 15, 2000, filed as Exhibit 10.20 to the
Company's 1999 Annual Report on Form 10-K, and incorporated
herein by reference.
10.15 Amendment No. 4 to UNOVA, Inc. Supplemental Executive Retirement
Plan, dated July 11, 2000.*
10.16 Supplemental Retirement Agreement between UNOVA, Inc. and Alton
J. Brann, filed on October 1, 1997 as Exhibit 10L to Amendment
No. 1 to the Company's Registration Statement on Form 10 No.
001-13279 and incorporated herein by reference.
10.17 Amendment No. 1 to Supplemental Retirement Agreement between
UNOVA, Inc. and Alton J. Brann, dated September 23, 1998, filed
as Exhibit 10.21 to the Company's September 30, 1998 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
10.18 Amendment No. 2 to Supplemental Executive Retirement Agreement
between UNOVA, Inc. and Alton J. Brann, dated March 11, 1999,
filed as Exhibit 10.18 to the Company's 1998 Annual Report on
Form 10-K, and incorporated herein by reference.
10.19 Amendment No. 3 to Supplemental Executive Retirement Agreement
between UNOVA, Inc. and Alton J. Brann, dated March 15, 2000,
filed as Exhibit 10.24 to the Company's March 31, 2000 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
10.20 Supplemental Executive Retirement Plan between UNOVA, Inc. and
Larry D. Brady dated March 15, 2000, filed as Exhibit 10.25 to
the Company's 1999 Annual Report on Form 10-K, and incorporated
herein by reference.
10.21 UNOVA, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.12 to
the Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.22 UNOVA, Inc. Executive Severance Plan (As Amended November 18,
1999), filed as Exhibit 10.31 to the Company's 1999 Annual Report
on Form 10-K, and incorporated herein by reference.
10.23 Board resolution dated July 25, 2000 amending the UNOVA, Inc.
Executive Severance Plan.*
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INDEX TO EXHIBITS (CONTINUED)
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10.24 Form of Promissory Notes in favor of the Company given by certain
officers and key employees, filed as Exhibit 10.14 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.25 Board resolution dated September 24, 1997 establishing the UNOVA,
Inc. Incentive Loan Program, filed as Exhibit 10.15 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.26 UNOVA, Inc. Executive Survivor Benefit Plan, filed as Exhibit
10.17 to the Company's 1997 Annual Report on Form 10-K, and
incorporated herein by reference.
10.27 UNOVA, Inc. 1999 Stock Incentive Plan, filed as Annex A to the
Company's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 7, 1999 (the "1999
Proxy Statement"), and incorporated herein by reference.
10.28 UNOVA, Inc. Management Incentive Compensation Plan, filed as
Annex B to the Company's 1999 Proxy Statement, and incorporated
herein by reference.
10.29 UNOVA, Inc. Group Executive Medical Benefit Plan, filed as
Exhibit 10.37 to the Company's 1999 Annual Report on Form 10-K,
and incorporated herein by reference.
10.30 Letter Offering Employment to Larry D. Brady as President and
Chief Operating Officer of UNOVA, Inc., as accepted by Mr. Brady
on June 16, 1999 ("Brady Employment Offer"), filed as Exhibit
10.32 to the Company's June 30, 1999 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.31 Agreement of Amendment dated June 22, 2000, to Brady Employment
offer.*
10.32 Restricted Stock Agreement between UNOVA, Inc. and Larry D.
Brady, filed as Exhibit 10.34 to the Company's September 30, 1999
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
10.33 Amendment No. 1 to the Restricted Stock Agreement between UNOVA,
Inc. and Larry D. Brady, dated June 22, 2000.*
27 Financial Data Schedule (filed only electronically with the
Securities and Exchange Commission). *
* Copies of these documents are included in this Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission.
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