<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 1-5881
BROWN & SHARPE MANUFACTURING COMPANY
------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 050113140
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
PRECISION PARK, 200 FRENCHTOWN ROAD, NORTH KINGSTOWN, RHODE ISLAND 02852
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code 401-886-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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CLASS A COMMON STOCK-PAR VALUE $1.00 NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
9 1/4% CONVERTIBLE SUBORDINATED NEW YORK STOCK EXCHANGE
DEBENTURES DUE DECEMBER 15, 2005
Securities registered pursuant to Section 12 (g) of the Act:
CLASS B COMMON STOCK - PAR VALUE $1.00
(Title of Class)
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 preceeding 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [ ___ ]
The aggregate market value (as calculated under the rules) of the voting common
stock held by non-affiliates of the Registrant was approximately
$33,000,000 as of March 16, 1995.
There were 8,179,168 Shares of Class A Common Stock and 531,710 Shares of Class
B Common Stock, each having a par value of $1.00 per share, outstanding as of
March 16, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been incorporated by reference in the following
parts of the Form 10-K: (1) Definitive Proxy Statement for the May 3, 1995
Annual Meeting incorporated by reference (to the extent specified) in Part III.
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BROWN & SHARPE MANUFACTURING COMPANY
INDEX
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Page
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<C> <S> <C>
PART I
Item 1 Business.................................................................. 3 - 12
General......................................................................... 3
Dimensional Metrology Industry.................................................. 3 - 4
Metrology Business Strategy..................................................... 5
MS Group........................................................................ 5 - 6
PMI Division.................................................................... 6 - 7
CM Division..................................................................... 7
Foreign Operations.............................................................. 7
Engineering and Product Development............................................. 7 - 8
Raw Materials and Sources of Supply............................................. 8
Patents, Licenses, Trademarks, and Proprietary Information...................... 8
Environmental Matters........................................................... 8 - 9
Employees....................................................................... 9 - 10
Competition..................................................................... 10
Backlog......................................................................... 10
Significant Customers........................................................... 11
Working Capital................................................................. 11
Segment Information............................................................. 11 - 12
Item 2 Properties................................................................ 12 - 13
Item 3 Legal Proceedings......................................................... 13
Item 4 Submission of Matters to a Vote of Security Holders....................... 13
Item 4A Executive Officers of the Registrant...................................... 13 - 14
PART II
Item 5 Market Price of the Registrant's Common Stock and Related Security
Holder Matters............................................................ 14
Item 6 Selected Financial Data................................................... 15
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................... 15 - 21
Item 8 Financial Statements and Supplementary Data............................... 21 - 39
Item 9 Disagreements With Accountants on Accounting and Financial Disclosure..... 40
PART III
Item 10 Directors and Executive Officers of the Registrant........................ 40
Item 11 Management Remuneration and Transactions.................................. 40
Item 12 Security Ownership of Certain Beneficial Owners and Management............ 40
Item 13 Certain Relationships and Related Transactions............................ 40
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 40 - 41
Signatures......................................................................... 42
Directors.......................................................................... 43
Officers........................................................................... 43
Investor Information............................................................... 43 - 44
Financial Statement Schedules...................................................... 45
Exhibit Index...................................................................... 46 - 51
</TABLE>
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PART I
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ITEM 1 - BUSINESS
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(dollars in thousands)
General
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Brown & Sharpe Manufacturing Company, together with its domestic and foreign
subsidiaries, including DEA, Roch, and Mauser, collectively referred to as
"Brown & Sharpe" or the "Company", is a leader in the design, manufacture, and
marketing of dimensional metrology products worldwide under several
internationally recognized brand names. Brown & Sharpe's products measure the
physical dimensions of objects and are used by a wide variety of industrial
companies to monitor product conformance to specifications. Manufacturers use
Brown & Sharpe's products to monitor product quality and are increasingly
integrating quality control functions, and therefore Brown & Shape's products,
directly into the manufacturing process. Brown & Sharpe markets its
dimensional metrology products and services in North America, Europe, Asia,
South America, and the Middle East. Primary end markets for Brown & Sharpe's
products are the automotive, aerospace, and industrial machinery industries.
Brown & Sharpe's operations are conducted through three units: Measuring
Systems, Precision Measuring Instruments, and Custom Metrology.
. The Measuring Systems Group (the "MS Group"), Brown & Sharpe's largest
unit, manufactures and markets a wide range of manual and computer-
controlled, high-precision CMMs. CMMs measure manufactured products and
their components within exacting dimensional tolerances, thereby enabling
manufacturers to minimize scrap and rework costs, reduce warranty expense,
and monitor product quality. The MS Group also sells a wide variety of
attachments, accessories, and related software and provides aftermarket
parts and services. Its products are sold under the Brown & Sharpe (R),
Leitz (R), and DEA (R) brand names. Brown & Sharpe believes that it is
the leader in the World market for CMM products as measured by net sales.
. The Precision Measuring Instruments Division (the "PMI Division")
manufactures and markets a wide range of mechanical and electronic
measuring and inspection tools including micrometers, dial indicators,
calipers, gauge blocks, and height gauges. PMI Division products are sold
under the Brown & Sharpe (R), Tesa (R), Etalon (R), Interapid (R),
Standard Gage (R), Mauser (R), Select Gauge (R), and Roch (R) brand names.
. The Custom Metrology Division (the "CM Division") designs and engineers
specialty products and systems to provide customized solutions for unique
measurement or inspection problems, such as applications requiring several
simultaneous measurements or inspection of an entire object in a high
volume production line. CM Division products are sold under the Tesa (R)
brand name.
Dimensional Metrology Industry
------------------------------
Dimensional metrology products measure, digitize, and inspect manufactured
parts and components for conformance to specifications. These products
include a wide range of measuring devices such as calipers, micrometers, dial
indicators, fixed gauges, height gauges, measuring microscopes, electronic
probes, customized semiautomatic and automatic measuring devices, optical and
laser measuring devices, robots, coordinate measuring machines, and related
software. Prices range from $20 for a caliper to over $3 million for a large
gantry CMM. A customer generally will choose between different dimensional
metrology technologies or products based upon the features, complexity,
variety and throughput of the items to be measured, degree of accuracy
required, and cost differences between the available metrology products. For
example, fixed gauges are more likely to meet a customer's metrology needs if
the items that a customer must measure are manufactured in high volume, are
all uniform in size and shape, such as automobile connecting rods, and results
are needed instantly. If, however, a customer needs to measure a large number
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of items all having different features from one another, such as the parts of
a prototype automobile engine, a more flexible measuring device such as a CMM
would more likely meet the customer's metrology needs. As manufactured
products and components become more complex, the flexibility of CMMs should
give them an advantage in certain applications over less flexible dimensional
metrology products such as manual, semiautomatic, and fixed gauges,
conversely, the ultimate in speed and accuracy is generally achieved by
dedicated fixed gauging.
Although the metrology industry is fragmented for lower-priced products, Brown
& Sharpe believes it is one of only five major worldwide competitors that
manufacture high precision CMMs. CMM products can be grouped into three
categories: small (which can be used to measure a product such as an
automobile carburetor), medium (which can be used to measure an item such as
an engine block), and large (which can be used to measure an item such as the
body of a truck or bus). CMMs were first introduced in the 1950s, but early
models were only capable of two-axis measurement. Over time, CMMs have
evolved into complex, computer assisted or computer driven, multi-axis
systems, often with attachments such as two-axis articulated probe holders,
contact and non-contact sensors of various types, electronic touch trigger
probes, continuous scanning analog probes, marking systems, laser probes, and
rotary tables. Today, CMMs are utilized to measure, digitize, and inspect
finished products, mechanical components, and families of parts in many basic
industries, including the automotive, aerospace, construction and farm
equipment, industrial machinery, defense, appliance, computer and electronics,
medical equipment, and semiconductor industries. CMM prices range from
approximately $12,000 to over $3 million depending upon accuracy, attachments,
and size.
The increasing use of more sophisticated software has played an important role
in the evolution of the CMM. Improved software, CAD/CAM, and network
technologies enable CMMs to automatically compensate for the position of the
piece to be measured relative to the measuring axes of the machine,
eliminating the need for the time-consuming manual positioning necessary with
other dimensional metrology products. Although CMM-type software can be added
to on-machine gauging, vision systems of various types, and a small percentage
of fixed gauges, CMMs are easier to use, more flexible, and generally provide
more analytical information than most products using competing technologies.
Manufacturers of component parts, as well as manufacturers of finished
products, are purchasers of CMMs and other dimensional metrology products.
Manufacturers depend upon dimensional metrology products to improve the
reliability, fit, and finish of their products and to improve efficiency by
reducing errors, scrap, throughput time, and work-in-progress inventories.
Traditionally, customers used either fixed gauges, optical comparators or
calipers, or other hand or bench tools to inspect product conformance to
specifications on the factory floor, while CMMs were used in factory quality
control departments due to the necessity for a controlled environment for
optimum CMM operation. Improved hardware and software technologies have
allowed customers to move CMMs onto the factory floor to facilitate direct
integration of CMM measurement capabilities into the manufacturing process.
Because CMMs, fixed gauges, and certain other types of dimensional metrology
products can be configured to accommodate a wide variety of customer
specifications for accuracy, speed, set-up time, and physical characteristics
of the objects to be measured, Brown & Sharpe believes these products can
effectively meet the evolving quality control needs of manufacturers.
Despite growth in the dimensional metrology markets in China, India, and the
Pacific Rim countries, management believes that in recent years the total
world market for dimensional metrology products had declined significantly in
terms of dollar denominated sales. In the three major world markets, the
decline had been more significant in Europe and Japan than in the United
States. Brown & Sharpe believes that this overall market decline had been
primarily related to global economic conditions which had resulted in reduced
levels of capital expenditures by manufacturers in many market segments. In
addition, during this period, revenues from sales of CMMs and other
dimensional metrology products were impacted by vigorous price and performance
competition due to over capacity in the dimensional metrology industry and
reduced demand by the capital goods sector for dimensional metrology products.
However, because of the steady economic recovery in the United States and also
observable improvement in Europe during the four quarter of 1994, Brown &
Sharpe believes that the world market for metrology products had improved in
1994 and should improve during the next few years.
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Metrology Business Strategy
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Brown & Sharpe is implementing a strategy designed to improve its
competitiveness and position itself for improvement in its markets, including
the currently depressed European market. Key elements of this strategy are
(i) expanding its market presence in the metrology industry, including through
acquisition and consolidation opportunities, (ii) reducing product costs
through more cost-effective product design, selective outsourcing, and
consolidation of manufacturing processes, (iii) providing "best in class"
customer service and strengthening its worldwide distribution network, and
(iv) focusing on technological innovations designed to improve product
performance, the development of new products, and the development of new
markets in the packaging and electronics industries.
. Expanded Market Presence. Through the acquisition of Roch, Mauser, and
DEA, Brown & Sharpe has expanded its product lines and its marketing and
distribution capabilities in Europe, South America, the Middle East,
India, and China. Brown & Sharpe intends to continue to expand and
strengthen its market presence and broaden its product lines and may
pursue selected small acquisition and consolidation opportunities within
the dimensional metrology industry. Brown & Sharpe believes that the
dimensional metrology industry has continuing over capacity and that
competitors having complementary product lines and geographic market
coverage may continue to become available for acquisition.
. Competitive Costs. Brown & Sharpe intends to continue to increase
production efficiency through more cost-effective product designs and
through other cost reductions. Brown & Sharpe intends to reduce costs by
using the "Design for Manufacturability and Assembly" (DFMA) engineering
principle, which strives to use the fewest parts and the lowest cost
assembly process by examining the production processes at each facility in
order to maximize efficiency, and by outsourcing components and complete
products in cases where it can achieve its high quality standards at
reduced costs.
. "Best in Class" Customer Service and Worldwide Distribution Capability.
Brown & Sharpe provides post-sale service and support to its customers
through its customer service departments and its regional and
international demonstration centers. Brown & Sharpe is committed to
providing "best in class" customer service and believes that the level of
customer service provided by Brown & Sharpe has improved in recent years
and is superior to the service provided by its principal competitors. In
order to continue to improve its customer service, Brown & Sharpe plans to
increase its emphasis on customer training by improving user manuals and
documentation relating to Brown & Sharpe's products and to directly
support a greater number of its customers by adding new demonstration and
service centers in previously unserved geographic areas. In addition,
Brown & Sharpe plans to strengthen its worldwide distribution capability,
principally by continuing to rationalize its existing distribution network
and by opening new demonstration centers and adding new direct sales
capacity or distributors where increased volume makes such distribution
methods cost effective.
. Technological Innovation. Brown & Sharpe intends to continue to enhance
and expand its offering of systems and products through sustained design
and manufacturing engineering at levels consistent with the past few
years. Brown & Sharpe performs some additional engineering development
activities through government grants in some countries and engages in
special projects that utilize customer funding.
MS Group
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The MS Group, the largest of Brown & Sharpe's three units, accounted for
approximately 59% of Brown & Sharpe's revenues in 1994 which includes the
sales of DEA acquired at the end of the third quarter of 1994. The MS Group
is headquartered in North Kingstown, Rhode Island. Products sold under the
Brown & Sharpe (R) name are manufactured at the North Kingstown facility,
products sold under the Leitz (R) name are manufactured in Wetzlar, Germany,
and products sold under the DEA (R) name are manufactured in Turin, Italy.
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Brown & Sharpe also manufactures some CMM products in the United Kingdom. The
primary end markets for the CMM products of the MS Group are the automotive,
aerospace, and industrial machinery industries.
MS Group products range from small, manually operated CMMs to large, high
speed, high precision automatic CMMs. In addition to these standard and
custom-configured CMMs, Brown & Sharpe also produces and sells high-speed
process control robots. The smallest machines can measure in a volume up to
16x14x12 inches and are priced at approximately $12,000, and the larger, high
speed, high accuracy CMMs with integrated software systems can cost over $3
million. The MS Group also provides optically based measuring machinery from
microscopes to vision systems. In addition, the MS Group provides
accessories, parts, after-sales service, rebuilds, and computer hardware and
software upgrades for Brown & Sharpe's CMMs and competing machines.
The MS Group's "user-friendly" CMM application software is an important
component of its marketing strategy for its CMM products. Management believes
that the MS Group's uniquely functional CMM software packages give it a
competitive advantage in the marketplace for CMMs. These proprietary software
products provide the MS Group's customers with an easily understood, icon-
based inspection analysis capability, graphical user interfaces and outputs,
and networking capability with manufacturing systems. The MS Group also
provides its customers with special software and systems integration of the MS
Group's products with the customer's host computer.
The MS Group distributes the majority of its products directly to customers
through its worldwide direct sales force, which is supplemented by a
distribution network of independent agents and distributors, especially in
foreign markets. The typical sales process involves lengthy, technical, one-
on-one discussions between the salesperson or the distributor/sales agent and
the customer. As an important part of its marketing and distribution
strategy, Brown & Sharpe provides in-depth training to the customer support
and demonstration centers. Brown & Sharpe currently operates demonstration
centers in eleven cities throughout the United States, eighteen centers
throughout Europe, and two in Asia, including four located at Brown & Sharpe's
CMM manufacturing facilities. Brown & Sharpe also operates contract
inspection and measuring services from these demonstration centers. Service
revenue generated by the demonstration centers offsets a portion of the cost
of operating the centers. In 1994, Brown & Sharpe closed four demonstration
centers in the United States in cities where existing Brown & Sharpe and DEA
demonstration centers overlapped, and opened new demonstration centers in four
additional U.S. cities. In Europe, the Company closed three demonstration
centers. Three demonstration centers in Europe and one in the United States
are scheduled to be closed in 1995.
PMI Division
------------
The principal products of Brown & Sharpe's PMI Division are precision
measuring tools and related instruments such as micrometers, dial indicators,
calipers, electronic height gauges, and gauge blocks. These tools and
instruments have a broad application and lower unit list prices (with a range
of $20 to approximately $13,000) than the prices of the MS Group's products
(which range from approximately $12,000 to over $3 million). PMI products
typically measure in one or two dimensions, and are often used in comparative
measuring where an unknown part or dimension is compared to a previously
measured part or dimension. PMI products also include systems and application
software for measuring and statistical process control. The primary end
markets for the products of Brown & Sharpe's PMI Division are the automotive,
aerospace, metal processing, and defense industries, although Brown & Sharpe's
PMI products are used in virtually all types of industrial settings. Brown &
Sharpe's PMI Division is headquartered in Renens, Switzerland, and its
products are manufactured at its plants in Rolle and Renens, Switzerland;
Poughkeepsie, New York; Leicester, St. Albans, and Plymouth, England; and in
Luneville, France.
The PMI Division generally distributes its products through international
import companies, regional distributors, and catalog houses throughout the
world. Brown & Sharpe sales offices located in key markets provide support to
the distributors and catalog houses. The PMI Division operates four sales
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offices in the United States and eight in other countries, which are staffed
by approximately 74 PMI Division employees.
CM Division
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Headquartered in Telford, England, the CM Division is an engineering division
which designs and engineers specialty products and systems to provide
customized solutions for unique measurement or inspection problems. For
example, the CM Division recently designed and implemented a system for
measuring the thickness of the metal top of a soda can and the thickness of
the groove scored around the can's pop-up tab, so that the manufacturer could
determine the ease with which the can could be opened by the end user while
insuring that the can would not rupture. The CM Division's products include
factory networks, contact and optical measuring machines, and fixtures aimed
at specific niche markets. Laser interferometers manufactured by the Division
set National Metrology Standards in 16 countries. CM Division products also
include components such as measuring sensors used in its custom gauges and
fixtures as well as those manufactured by other companies. Prices for CM
Division products range from approximately $20,000 to $1 million for systems.
Often, the CM Division is able to produce a superior customized product while
at the same time gaining the expertise necessary to convert such customer-
funded research into new, standard Company products. For example, the CM
Division has recently developed a family of optical measuring systems, with
list prices of approximately $50,000 to $500,000.
The primary end markets for the custom-designed products of the CM Division
currently are automotive, aerospace, defense, package and can manufacturing,
oil drilling, and standards laboratories. Sales of these products typically
involve a close, highly technical relationship with the customer. This direct
relationship with the customer is reinforced by strong and continuing efforts
to provide superior customer service through ongoing customer training and
technical support.
Foreign Operations
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Brown & Sharpe manufactures and sells substantial amounts of its dimensional
metrology products in foreign countries. For fiscal 1994, approximately 59%
of Brown & Sharpe's net sales were to customers located outside the United
States. Manufacturing operations take place in Italy, Switzerland, Germany,
England, and France, as well as in the United States, and Brown & Sharpe's
products are sold in over 60 countries worldwide. As of December 31, 1994,
approximately 73% of Brown & Sharpe's assets were located outside the United
States (based on book values). Accordingly, margins and the ability to export
competitively from the Company's manufacturing locations are affected by
fluctuations in foreign currency exchange rates. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Brown &
Sharpe" in Item 7 of this Report. For additional financial information
concerning the foreign operations of Brown & Sharpe for 1992, 1993, and 1994,
see "Segment Information" below in this Item 1.
Engineering and Product Development
-----------------------------------
Brown & Sharpe's commercial success is dependent upon its ability to develop
products, enhancements, and applications that meet changing customer metrology
needs and anticipate and respond to technological changes. Brown & Sharpe
designs, develops, and refines its products internally through engineering
departments within its product groups and divisions. Brown & Sharpe employs
approximately 110 engineers and technicians, the majority of whom hold
engineering or other university degrees, in its design engineering activities.
When it is more cost-effective to do so, Brown & Sharpe purchases product
designs or portions of product designs from engineering subcontractors or
acquires such designs through licensing arrangements. Brown & Sharpe also
benefits from research and development efforts which are subsidized by
customer funds and, in certain countries, by government research grants.
Brown & Sharpe research, development, and manufacturing engineering activities
are conducted in the United States, Italy, France, Switzerland, Germany, the
United Kingdom, and Lithuania.
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Brown & Sharpe derived substantial net sales in 1994 from the sale of products
that were introduced into the market after 1987. Brown & Sharpe has been
successful in bringing to market new, high-quality products and has introduced
at least one major new product every year since 1987. The current objectives
of Brown & Sharpe's design and manufacturing engineering activities are the
integration of the DEA and Roch technologies with Brown & Sharpe's previously
existing technologies and the introduction of new MS and PMI products. In
1994, Brown & Sharpe invested $9.2 million in product design and manufacturing
engineering, or about 4.5% of its 1994 net sales. In 1992 and 1993, Brown &
Sharpe expended $10.9 million and $8.7 million, respectively, for product
design, development, refinement, and manufacturing engineering. In addition,
Brown & Sharpe performs engineering development activities funded by
government grants in some countries and engages in special projects that
utilize customer funding.
Raw Materials and Sources of Supply
-----------------------------------
Brown & Sharpe purchases certain products, raw materials, supplies, and other
components from a variety of suppliers, and considers its source of supply to
be adequate. Brown & Sharpe does, at times, depend upon various sole sources
of supply for various procurement requirements (generally of items designed by
Brown & Sharpe), but has not experienced any significant difficulty in meeting
delivery obligations because of its reliance on such a supplier. The loss of
any one of these various sole suppliers would not have a material adverse
effect on Brown & Sharpe. Brown & Sharpe depends, as do other leading CMM
manufacturers, on a sole source of supply for certain of the electronic probes
used on CMM machines and, in the event of unavailability of such source, would
be adversely affected, as would its competitors. Brown & Sharpe continues to
explore means of lowering production costs through selective outsourcing in
situations where Brown & Sharpe can achieve its high quality standards via
subcontractors.
Patents, Licenses, Trademarks, and Proprietary Information
----------------------------------------------------------
Brown & Sharpe's business is not significantly affected by or dependent upon
the procurement or maintenance of patents covering Brown & Sharpe's products.
Nevertheless, Brown & Sharpe pursues, where appropriate, patent protection for
inventions, developments, and improvements relating to its products both in
the United States and abroad. Brown & Sharpe owns, or has the right to use, a
number of trademarks which it believes are valuable in promoting the sale of
certain of its principal products, and it has registered the trademarks that
it owns in the United States and in some foreign countries. The
internationally recognized brand names under which Brown & Sharpe sells its
products are the subject of trademarks owned or licensed by Brown & Sharpe and
are important to Brown & Sharpe's marketing strategy, as brand name
recognition is a significant factor in the dimensional metrology market.
One of Brown & Sharpe's CMM products, a horizontal arm-type CMM, has been
manufactured and sold in North America under an exclusive license from an
independent German company which has recently been modified to a non-exclusive
license agreement. Brown & Sharpe has entered into an exclusive arrangement
in 1994 with another German CMM manufacturer to market and sell its horizontal
CMM on an exclusive basis in North America and on a non-exclusive basis in the
rest of the world. In addition, DEA manufactures its horizontal arm CMM under
a non-exclusive license granted by a German company Zett Messtechnik. In
addition, Brown & Sharpe uses the Leitz (R) and Mauser (R) brand names under
royalty-free license agreements entered into in connection with Brown &
Sharpe's acquisition of these product lines. These licenses expire in 1997
and 1999, respectively. Brown & Sharpe believes it will be able to negotiate
satisfactory extensions prior to expiration and that the failure to renew
these licenses would not have a material adverse effect on Brown & Sharpe.
Environmental Matters
---------------------
The Company is not significantly affected by compliance with rules and
regulations promulgated under environmental laws since its manufacturing
processes do not produce, as a by-product, material amounts of waste, water
discharges or air emissions deemed hazardous under such laws. However, the
Company is subject from time to time to environmental claims. See Note 8,
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"Contingencies" of Notes to Consolidated Financial Statements in Item 8 of
this Annual Report.
Employees
---------
At December 31, 1994, Brown & Sharpe had 2,370 employees, (as compared with
1,543 at December 25, 1993), including approximately 1,788 employees located
outside the United States. The increase from the end of 1993 was due to the
acquisitions of Roch and DEA during 1994 which was partially offset by other
employee reductions implemented as a result of Brown & Sharpe's integration
and other cost-cutting efforts, especially in Europe. Brown & Sharpe
considers its relations with its employees to be good, although there can be
no assurance that Brown & Sharpe's cost-cutting efforts or other factors will
not cause a deterioration in these relations.
Approximately 1,700 of Brown & Sharpe's employees located at sites in the
United States, Italy, Switzerland, England, Germany, and France are covered by
collective bargaining agreements which expire at various times between
December 5, 1995 and June 30, 1998. Brown & Sharpe expects that these
collective bargaining agreements will be renegotiated successfully prior to
their expiration. However, there can be no assurance that successor
collective bargaining agreements will be successfully negotiated, that
negotiations will not result in work stoppages, or that a work stoppage would
not materially interfere with Brown & Sharpe's ability to produce the products
manufactured at the affected location.
In addition to the collective bargaining agreements that cover workers at
certain of Brown & Sharpe's foreign subsidiaries, it is customary for these
employees to be represented by various works or shop councils. These councils
are governed by applicable labor laws and are comprised of members who are
elected or appointed by the work force. Except for the top level of
management, these councils represent the entire work force at their location
in its dealings with senior management on matters affecting the work force or
arising under the relevant labor contracts in effect at the location.
A collective bargaining agreement with the International Association of
Machinists and Aerospace Workers (the "IAM") relating to certain manufacturing
employees in North Kingstown, Rhode Island expired in October 1981. Brown &
Sharpe and the IAM failed to reach agreement on the terms of a successor
collective bargaining agreement, resulting in a strike by the IAM. See Item 3
"Legal Proceedings" in this Report. No successor collective bargaining
agreement was entered into, although the IAM remains the representative of the
bargaining unit. Brown & Sharpe continues to satisfy its obligation to
bargain with respect to, proposed changes to the terms and conditions of
employment, although no collective bargaining has resulted in recent years.
Although the manufacturing employees represented by the IAM are still
technically on strike, no strike or picket activity has occurred since 1982
and management does not anticipate that any such activities will occur in the
future. At the time of the strike in 1981, Brown & Sharpe hired new employees
to replace striking employees. Since that time, many of the striking
employees have been rehired by Brown & Sharpe, but such employees are not
working under an IAM contract. The continuing strike by the IAM does not have
a material adverse effect on the operations of Brown & Sharpe.
At certain of Brown & Sharpe's European locations, Brown & Sharpe has utilized
a staffing procedure called "short work" to reduce the hours that an employee
works during periods of decreased demand for Brown & Sharpe's products. This
staffing procedure is similar to furloughs utilized by U.S. employers,
although the specifics differ in each country. Generally, payment is made to
the employee and the employer is eligible for government reimbursement for a
portion of the amount paid to the employee working reduced hours. Each
country generally requires that applications be made for reimbursement the
approval of which may be delayed for significant periods. Each country may
also impose time limits and other material conditions as to how often an
employer may use this mechanism. Brown & Sharpe has utilized "short work" in
Switzerland and Germany. This staffing procedure is not available in France
or the United Kingdom. Approximately 7 employees were on "short work" as of
December 31, 1994.
Page 9
<PAGE>
The following table sets forth the location of Brown & Sharpe's employees as
of December 31, 1994:
<TABLE>
<CAPTION>
Country Employees (1)
---------------- -------------
<S> <C>
France.......... 237
Germany......... 271
Italy........... 477
Japan........... 26
Spain........... 16
Switzerland..... 353
United Kingdom.. 408
United States... 582
-----
TOTAL........... 2,370
-----
</TABLE>
(1) Includes full-time employees on "short-work." Other part-time employees
are included on a full-time equivalent basis.
Competition
-----------
Brown & Sharpe's business is subject to intense direct and indirect
competition from a considerable number of domestic and foreign firms, a number
of which, in certain markets, are larger in overall size than Brown & Sharpe.
Most of these firms, however, do not compete with Brown & Sharpe in all
product lines. The principal factors affecting competition include
reliability and quality of product, technological proficiency, price, ease of
system configuration and use, application expertise, engineering support,
local presence, distribution networks, and delivery times. Price competition
has been intense for dimensional metrology products, due to the recent period
of decreased demand for these products that has resulted in over capacity
within the industry. Brown & Sharpe believes that competition in the
dimensional metrology field will continue to be intense in the future as a
result of advances in technology, continuing over capacity in the dimensional
metrology industry, and consolidations and/or strategic alliances among
competitors. In addition to direct competition from companies that market
similar types of products, Brown & Sharpe is also subject to indirect but
effective competition from firms that market other dimensional metrology
products, such as fixed gauging and vision-based systems, which utilize
alternative technology or methodologies to perform functions similar to those
of the CMMs and other products manufactured or sold by Brown & Sharpe.
Brown & Sharpe's single largest global competitor is Mitutoyo/MTI Corp., a
subsidiary of Mitutoyo Solsakusho Co. Ltd., a Japan-based company, which is
the largest supplier of metrology equipment and products worldwide. In
addition to Mitutoyo, the MS Group's main competitors are Carl Zeiss, Inc., a
subsidiary of Carl-Zeiss-Stiftung AG, the Sheffield Measurement Division of
Giddings & Lewis, Inc., and LK Tool Co. Ltd., a subsidiary of TransTech Ltd.
The primary competitors faced by the PMI Division are Mitutoyo, L.S. Starrett
Co. and Federal Products Co. (Inc.), a subsidiary of Esterline Technologies
Corporation. Marposs S.p.A. is a major competitor of the CM Division for
custom metrology sales. Marposs, which is based in Italy, competes with the
CM Division through its sales subsidiaries in all major markets.
Backlog
-------
The Company's backlog of product orders was $61,000 at year-end 1994, compared
to $26,000 and $30,000 at year-end 1993 and 1992, respectively. Backlog at
year-end 1994 includes $26,000 attributable to DEA.
All of the orders included in the Company's year-end 1994 backlog were
requested to be filled and completed within one year and are, subject to
possible customer cancellation, expected to be completed in 1995.
Page 10
<PAGE>
Significant Customers
---------------------
The Company has no single customer which accounts for 10% or more of its
consolidated net sales however, the automotive manufacturers worldwide
(excluding their suppliers) account for a significant portion of the Company's
net sales. The loss of a few of these major manufacturers would have a
substantial effect upon the Company.
Working Capital
---------------
A substantial amount of working capital is normally required to carry the
inventory and accounts receivable that are necessary in the Company's
businesses. Working capital was $102,883 at year-end 1994 compared to $46,025
at year-end 1993. See the discussion of working capital in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of this Annual Report.
<TABLE>
<CAPTION>
Segment Information
-------------------
1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Business Segments:
Metrology
Net sales $ 205,000 $ 155,133 $ 152,201
Operating profit (loss) (6,673) 1,652 (8,857)
Percent (3.2)% 1.1% (5.8)%
Identifiable assets 265,598 157,699 153,766
Capital expenditures 8,929 4,356 12,424
Depreciation 6,442 5,781 6,591
General Products (through April 1993)
Net sales $ -- $ 1,902 $ 8,494
Operating profit (loss) -- (932) 760
Percent -- (49.0)% 8.9%
Identifiable assets -- -- 7,680
Capital expenditures -- 43 50
Depreciation -- 81 245
Geographic Area:
Sales to Unaffiliated
Customers:
United States $ 83,901 $ 72,257 $ 69,810
Europe 92,770 61,891 70,692
Other 28,329 22,887 20,193
--------- -------- ---------
$ 205,000 $157,035 $ 160,695
--------- -------- ---------
Transfers Between
Geographic Areas:
United States $ 3,144 $ 4,040 $ 5,542
Europe 19,288 12,365 12,167
--------- -------- ---------
$ 22,432 $ 16,405 $ 17,709
--------- -------- ---------
</TABLE>
Page 11
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Operating Profit (Loss):
United States $ 1,303 $ 5,151 $ 1,283
Europe (7,976) (4,431) (9,380)
-------- -------- ---------
$ (6,673) $ 720 $ (8,097)
-------- -------- ---------
Identifiable Assets:
United States $ 74,252 $ 39,521 $ 34,537
Europe 191,346 118,178 126,909
Corporate 6,676 8,172 4,640
-------- -------- ---------
$272,274 $165,871 $166,086
-------- -------- ---------
</TABLE>
ITEM 2 - PROPERTIES
---------------------------
The following table sets forth certain information concerning Brown & Sharpe's
major operating facilities:
<TABLE>
<CAPTION>
Owned/ Approximate
Location Leased Principal Use Square Footage
-------- ------ ------------- --------------
<S> <C> <C> <C>
Unites States
N. Kingstown, Rhode
Island Owned Manufacturing, Engineering, Sales,
and Administration 343,000(1)
Poughkeepsie, New York Owned Manufacturing 58,000
Livonia, Michigan Leased Sales and Administration 57,000
Farmington Hills,
Michigan Leased Sales 24,000
Italy
Moncalieri Leased Engineering, Sales, and Administration 260,000
Grugliasco Leased Assembly 105,000
Moncalieri Leased Manufacturing 70,000
Switzerland
Renens Owned Manufacturing, Engineering, Sales,
and Administration 139,000
Rolle Owned Manufacturing 51,000
Germany
Wetzlar Owned Manufacturing, Engineering, Sales,
and Administration 280,000
Ludwigsburg Leased Sales 15,000
Frankfurt Leased Sales 11,000
United Kingdom
St. Albans Owned Manufacturing and Sales 36,000
Telford Leased Manufacturing, Engineering, Sales,
and Administration 32,000
Leicester Owned Manufacturing 14,000
Swindon Leased Sales 7,500
Bedford Leased Manufacturing, Sales, and Administration 5,000
Plymouth Leased Manufacturing, Sales, and Administration 5,000
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
Owned/ Approximate
Location Leased Principal Use Square Footage
---------------- ------ ------------------------------------- --------------
<S> <C> <C> <C>
France
Luneville Leased Manufacturing, Engineering, and Sales 77,100
Villeban Leased Sales 18,000
Spain
Barcelona Leased Sales 16,000
</TABLE>
------
(1) Excludes approximately 417,000 square feet leased to unrelated parties.
In addition, Brown & Sharpe leases smaller sales offices located in the United
States, Europe, and Asia. In the opinion of management, Brown & Sharpe's
properties are in good condition and adequate for Brown & Sharpe's business as
presently conducted.
ITEM 3 - LEGAL PROCEEDINGS
--------------------------
Litigation
----------
Refer to Note 8 "Contingencies" of Notes to Consolidated Financial Statements
in Item 8 of this Annual Report.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
There were no matters submitted to a vote of the security holders during the
quarter ended December 31, 1994.
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------
The following table summarizes information regarding Executive Officers of the
Company as of March 4, 1994:
<TABLE>
<CAPTION>
Name Age Positions Held During the Last Five Years
---- --- -----------------------------------------
<S> <C> <C>
Fred M. Stuber 56 President & Chief Executive Officer since January, 1991;
previously Vice President & Managing Director - Tesa, S.A.
since May 1, 1989.
Charles A. Junkunc 52 Vice President & Chief Financial Officer since May 1,
1992; previously self-employed consultant since November
1990; previously Senior Vice President - Finance and Chief
Financial Officer of Data Products Corporation (manufacturer
of computer printers) since April 1987.
Antonio Aparicio 44 Vice President & General Manager - Precision Measuring
Instruments since September 1991; previously Marketing
Director - Precision Measuring Instruments.
John Cooke 58 Vice President & General Manager - Custom Metrology since
September 1991; previously Managing Director of Tesa
Metrology Limited (a subsidiary).
Karl J. Lenz 49 Vice President since September 1991: General Manager - Leitz
Messtechnik GmbH since June 1990; previously General Manager
- Messtechnik Division of Leica Industrieverwaltung.
</TABLE>
Page 13
<PAGE>
<TABLE>
<CAPTION>
Name Age Positions Held During the Last Five Years
---- --- -----------------------------------------
<S> <C> <C>
Richard F. Paolino 50 Vice President & General Manager - Measuring Systems.
John M. Lochner 48 Controller and principal accounting officer.
</TABLE>
To the best of the knowledge of the Registrant, none of the Executive Officers
has any family relationships with any of the others. Each Executive Officer
holds office until the first meeting of the Board of Directors following the
next Annual Shareowners' meeting and until his successor is elected or
appointed and qualified, unless he dies, resigns, is removed or replaced.
PART II
-------
ITEM 5 - MARKET PRICE OF THE REGISTRANT'S COMMON
-------------------------------------------------
STOCK AND RELATED SECURITY HOLDER MATTERS
-----------------------------------------
The Class A Common Stock is listed on the New York Stock Exchange with a
symbol "BNS". At March 16, 1995, the Company had 1,322 shareowners of record
of its Class A Common Stock and 1,018 shareowners of record of its Class B
Common Stock. The quarterly high and low closing prices of the Class A Common
Stock on the New York Stock Exchange (the Class B Common Stock is not traded
and is subject to restrictions on transfer) were a high of $6.88 and a low of
$5.63 in 1995 through February 28 and were reported during fiscal 1994 and
1993 as presented below.
<TABLE>
<CAPTION>
Fiscal Year High Low
----------- ----- -----
<S> <C> <C>
1994
4th Quarter $7.25 $5.25
3rd Quarter 7.50 6.00
2nd Quarter 6.75 5.75
1st Quarter 8.00 6.25
1993
4th Quarter $8.63 $6.75
3rd Quarter 8.63 7.38
2nd Quarter 9.00 7.63
1st Quarter 9.38 6.38
</TABLE>
No dividends have been paid by the Company since 1990. Dividend payments have
been suspended in order to conserve cash. Also, payment of dividends is
currently not permitted under an existing loan facility. See Note 5 "Short-
Term Borrowings" of Notes to Consolidated Financial Statements in Item 8 of
this Annual Report.
Page 14
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------
The following selected consolidated financial data should be reviewed in
conjunction with Part II, Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto in Item 8 of this Annual Report.
<TABLE>
<CAPTION>
(dollars in thousands, except per share data,
number of shareowners, and employees) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Continuing Operations for the year:
Net sales $ 205,000 $157,035 $160,695 $175,847 $176,703
Operating profit (loss) (6,673) 720 (8,097) (306) (12,089)
Percent (3.2)% .5% (5.0)% (.2)% (6.8)%
Net (loss) (14,335) (2,416) (7,984) (2,901) (12,237)
Average shares outstanding (thousands) 6,057 4,969 4,899 4,639 4,574
Per common share:
Net (loss) (2.37) (.49) (1.63) (.62) (2.67)
Cash dividends declared: Class A -- -- -- -- .32
Class B -- -- -- -- .24
At year-end:
Backlog 61,000 26,000 30,000 23,000 38,000
Assets 272,274 165,871 166,086 183,748 205,912
Current ratio 1.95 1.73 1.81 2.17 1.64
Long-term debt 70,215 32,696 34,626 35,310 21,667
Total debt 92,613 64,500 60,700 61,369 58,053
Equity 78,925 63,520 66,674 80,268 82,893
Per share 9.12 12.78 13.43 16.67 18.06
Debt ratio .540 .504 .477 .433 .412
Number of shareowners 4,100 4,900 5,400 5,100 4,800
Employees 2,370 1,543 1,768 2,000 2,197
</TABLE>
Note: The above tabulation includes the effects of substantial
acquisitions, particularly in 1994, and should be evaluated accordingly.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------------------------
AND RESULTS OF OPERATIONS (dollars in thousands)
-------------------------
In completing its transformation from a machine tool company to a dimensional
metrology company, Brown & Sharpe has made a number of acquisitions and
divestitures that have impacted, and will continue to impact, its results of
operations and liquidity. At the end of the first quarter of 1994, Brown &
Sharpe acquired Roch and Mauser, and at the end of the third quarter of 1994,
Brown & Sharpe acquired DEA. During the first and second quarters of 1993,
Brown & Sharpe sold its machine tool spare parts and rebuild operations.
During the first quarter of 1992, Brown & Sharpe sold its pump operations and
its 80% ownership interest in GageTalker Corporation, a provider of data
collection and statistical process control systems ("GageTalker"). In late
1991, Brown & Sharpe purchased Thomas Mercer Limited, a manufacturer of
metrology devices that is now included in the PMI Division ("Mercer"). At the
end of the second quarter of 1990, Brown & Sharpe acquired Leitz, a
manufacturer of high accuracy CMMs. The DEA Acquisition has had and will have
a significant impact on Brown & Sharpe's results of operations and liquidity
and financial resources. While DEA sales were $101.4 million in 1994 compared
to $112.4 million in 1993, and while DEA was not profitable in 1994 or 1993,
only DEA's fourth quarter 1994 results -- namely sales of $37.6 million,
operating income of $3.6 million, and net income of approximately $4.1
million, after external interest expense of $0.3 million and other income net
of $0.8 million, are included in Brown & Sharpe's results below. The
following discussion of Brown & Sharpe's historical financial condition and
Page 15
<PAGE>
results of operations should be read in conjunction with the Consolidated
Financial Statements of Brown & Sharpe and the notes thereto included
elsewhere in this Annual Report.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Year Ended
----------
Dec. 31, Dec. 25, Dec. 26,
1994 1993 1992
------ ----- ------
<S> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0%
Cost of goods sold............................ 69.7 70.6 72.4
Selling, general, and administrative expense.. 31.6 29.0 32.7
Restructuring charges......................... 2.0 -- --
------ ----- ------
Operating profit (loss)...................... (3.3) 0.5 (5.0)
Interest expense.............................. 3.2 3.2 3.3
Other income, net............................. 0.7 1.8 1.3
------ ----- ------
Loss before income taxes...................... (5.8) (1.0) (7.0)
Income tax provision (benefit)................ 1.2 0.5 (2.0)
------ ----- ------
Net loss...................................... (7.0)% (1.5)% (5.0)%
====== ===== ======
</TABLE>
Year Ended December 31, 1994 Compared to Year Ended December 25, 1993
Orders. Orders totaled $209.9 million in 1994, an increase of $54.0 million,
or 34.6%, from the prior year. Adjusted to exclude orders of businesses
acquired in 1994 and sold in 1993, orders in 1994 increased $15.8 million or
10.1% compared to 1993. The remaining increase resulted primarily from
customer orders of DEA products since its acquisition on September 28, 1994 of
$28.7 million, orders of Roch and MPM products since their acquisition on
March 24, 1994 of $8.4 million, and an effect of increased orders of about
$3.0 million as a result of strengthening of certain European currencies
against the U.S. dollar in 1994. Also, the machine tool spare parts and
rebuild operations, sold near the end of the first quarter of 1993,
represented $1.9 million of orders in 1993. CMM equipment machine orders
increased in 1994 from the canning industry, and PMI orders increased,
primarily from its European distributors. MS orders were higher in 1994 than
in 1993. Backlog at December 31, 1994 increased to $61.0 million, including
$26.4 million from the purchase of DEA and $1.7 million from the purchase of
Roch and MPM, as compared with $26.1 million at year end 1993.
Net Sales. Net sales in 1994 were $205.0 million, an increase of $48.0
million or 30.6% from the prior year. The increase resulted primarily from
sales of DEA products and services since its acquisition of $37.6 million,
sales of Roch and MPM products of $7.8 million, and an effect of increased
sales of about $3.3 million as a result of strengthening of certain European
currencies against the U.S. dollar in 1994. Also, $1.9 million of sales in
1993 were attributable to machine tool spare parts and rebuild operations sold
in early 1993. Excluding the effect of these items, sales increased $1.2
million, or 0.8%, from 1993. Excluding DEA, MS 1994 net sales were 2.9% below
1993, largely as a result of entering 1993 with a larger backlog than at the
beginning of 1994. In 1994, increasing U.S. orders have been received for
larger value, larger size machines which are not generally included in sales
until subsequent quarters due to required lead times. Net sales of PMI and CM
products increased from the prior year primarily due to the resolution of the
financial difficulties of a German distributor, which had depressed net sales
in 1993.
Gross Profit. Gross profit margin increased to 30.3% in 1994 compared to
29.4% in 1993. Excluding DEA, gross profit declined to 29.1% in 1994. The
Company's gross profit includes benefits from the liquidation of LIFO
inventories of $0.6 million and $0.7 million in 1994 and 1993, respectively.
During 1994, the Company recorded inventory write-downs amounting to $3.7
million, almost totally at European operations, compared to $0.3 million
reduction of inventory reserves in 1993.
Selling, General and Administrative Expense. Selling, general and
administrative expense ("SG&A") was $64.7 million or 31.6% of net sales
compared to $45.5 million or 29.0% of net sales in 1993. In 1994, exclusive
Page 16
<PAGE>
of DEA SG&A of $9.9 million, SG&A was 32.8% of sales. The increase in 1994
was generally due to special items including an extra week of expenses in
fiscal 1994 or about $1 million compared to 1993, the receipt of U.S.
litigation proceeds in 1993 of about $.5 million, the addition of Roch and MPM
SG&A costs since acquisition in late March 1994 of about $2.2 million, and the
recording in the second quarter of 1994 of a provision increasing the
allowance for uncollectible accounts receivable by about $.6 million for
collection uncertainties arising from one prior year sale to a single
customer. SG&A also increased during the fourth quarter of 1994 because of
increased use of consultants, relocation, and other costs arising as a result
of the DEA and Roch acquisitions.
Restructuring Charges. Restructuring charges amounted to $4.2 million in 1994
($1.0 million and $3.2 million in the third and fourth quarters,
respectively), principally Brown & Sharpe employee severance and Brown &
Sharpe sales offices closing costs of $2.4 million associated with integrating
Brown & Sharpe's existing operations with those of DEA, acquired on September
28, 1994, and $1.8 million of such costs arising from the acquisition of Roch
in France on March 24, 1994. Additional Brown & Sharpe integration actions
contemplated for 1995 are likely to result in the recording of additional
restructuring charges of up to about $1 million.
Operating Profit (Loss). Brown & Sharpe generated an operating loss of $6.7
million in 1994 compared to an operating profit of $0.7 million in 1993.
Excluding restructuring charges and inventory writedowns, 1994 operating
profit was $1.2 million. DEA generated an operating profit of $3.6 million in
the fourth quarter of 1994 subsequent to its acquisition. In the United
States, operating profit for 1994 totaled $1.3 million compared to an
operating profit of $5.2 million in 1993. The lower operating profit in the
U.S. in 1994 was substantially due to the increased cost of European purchased
goods resulting from unfavorable foreign currency exchange rates and the
additional week of selling, general and administrative expense in 1994, the
53rd week, as well as due to the other reasons discussed above. Brown &
Sharpe believes that its normal sales pattern would not generally result in
proportionate increases in net sales in a fifty three week year as compared to
a fifty two week year. In 1995, Brown & Sharpe will change its reporting year
to the calendar year. Foreign operations generated a loss of $8.0 million in
1994 compared to an operating loss of $4.4 million in 1993. Excluding
restructuring charges and inventory writedowns, foreign operations generated a
loss of $0.7 million in 1994.
Interest Expense. Interest expense totaled $6.6 million in 1994 compared to
$5.1 million in 1993. This increase reflects a $19.8 million increase in the
average annual balance of borrowings, primarily the $16.8 million of debt on
the balance sheets of the companies acquired in 1994, with a slight decrease
in the average effective interest rate in 1994.
Other Income, Net. Other income, net was $1.3 million in 1994 and $2.8
million in 1993. In 1994, the Company recorded foreign exchange gains of $1.1
million and interest income of $0.5 million whereas in 1993, the Company
recorded a $2.0 net gain on the sale of certain small business operations and
interest income of $0.3 million.
Income Tax Provision. The provisions for income taxes for 1994 and 1993
include foreign, federal, and state income taxes. The income tax expense in
1994 resulted from foreign income tax of $0.8 million for certain profitable
European entities and U.S. tax provisions of $3.5 million for 1994 U.S. profit
and for adjustment of prior tax provisions. Deferred credits amount to $1.9
million. The income tax expense in 1993 resulted largely from profits in the
U.S. Brown & Sharpe continues to have substantial loss carryforwards in most
European countries.
Year Ended December 25, 1993 Compared to Year Ended December 26, 1992
Orders. Orders totaled $155.9 million in 1993, a decline of $12.9 million, or
7.6% , from the prior year. The decrease resulted principally from the sale
of the machine tool spare parts and rebuild operations in the first quarter of
1993, which represented $8.6 million of incoming orders in 1992 compared to
$1.9 million of incoming orders in 1993. In addition, weakening of certain
European currencies against the U.S. dollar resulted in a decrease in reported
1993 orders of approximately $4.8 million compared to 1992. Excluding the
Page 17
<PAGE>
effect of these items, 1993 orders increased $1.0 million from 1992. Backlog
was $26.1 million at year-end 1993, compared with $30.2 million at year-end
1992, which was a particularly high level for Brown & Sharpe's metrology
business. The decrease in backlog resulted principally from a decrease in
orders in 1993 as compared to 1992.
Net Sales. Net sales in 1993 were $157.0 million, a decrease of $3.7 million
or 2.3%, as compared to $160.7 million in 1992. The weakening of certain
European currencies against the U.S. dollar caused a decrease of $5.0 million
in net sales in 1993 as compared to 1992. In addition, in the first and
second quarters of 1993, Brown & Sharpe disposed of its machine tool spare
parts and rebuild operations, which accounted for $1.9 million and $8.5
million of net sales in 1993 and 1992, respectively. Excluding the effect of
these items, net sales in 1993 increased $7.9 million from the prior year.
Net sales in the United States increased to $72.3 million in 1993 from $69.8
million in 1992, an increase of 3.5%. The increase was primarily due to
improvements in the U.S. economy and in the automotive industry in particular
and was reflected in increased sales of both CMMs and PMI division products.
The increase in U.S. net sales was offset by a $6.7 million reduction
resulting from the sale of the machine tool parts and rebuild operations. In
Europe, net sales declined to $62.2 million in 1993 from $70.7 million in
1992, or 11.9%, as a result of the continuing recession in Europe and the
weakening of certain European currencies against the U.S. dollar. Net sales
in the rest of the world totaled $22.5 million in 1993, up 11.6% from sales of
$20.2 million in 1992. This increase was principally due to increased sales
in Asia.
Gross Profit. Gross profit margin increased to 29.4% in 1993 from 27.6% in
1992. In 1992, cost of goods sold included inventory write-offs of $2.0
million resulting from the introduction of new products that replaced certain
of Brown & Sharpe's existing products and $2.5 million of costs, primarily
employee severance expenses at Brown & Sharpe's German and Swiss manufacturing
facilities in response to declining sales. Brown & Sharpe's gross profit for
these years also reflects benefits from the liquidation of LIFO inventories of
$9.8 million in 1992 and $0.7 million in 1993 resulting from successful
efforts to reduce inventory in the United States. Gross profit in 1993 was
also reduced as a result of the weakening of certain European currencies
against the U.S. dollar. Excluding the effect of these items, gross profit
was $46.7 million in 1993, or a margin of 29.7%, compared to $39.1 million in
1992, or a margin of 24.3%. This improvement reflects the benefits of Brown &
Sharpe's cost control efforts described above.
Selling, General, and Administrative Expense. SG&A expense was $45.5 million
in 1993 and $52.5 million in 1992. As a percentage of net sales, SG&A expense
decreased to 29.0% in 1993 from 32.7% in 1992. SG&A expense in 1992 includes
approximately $2.6 million of costs, primarily for employee severance at
European facilities, and $1.5 million of incentive compensation related to the
acquisition of the remaining minority interest in Technicomp, Brown & Sharpe's
education quality training products subsidiary.
Operating Profit (Loss). Operating profit was $0.7 million in 1993 compared
to an operating loss of $8.1 million in the prior year. Excluding an
operating loss of $0.9 million attributable to the divested machine tool
operations, operating profit in 1993 totaled $1.7 million. In the United
States, operating profit increased substantially in 1993 to $5.2 million from
$1.3 million in 1992 for the reasons discussed earlier. Although the European
recession continued, Brown & Sharpe's European operations generated improved
results, posting an operating loss of $4.4 million in 1993 compared to an
operating loss of $9.4 million in 1992.
Interest Expense. Interest expense declined to $5.1 million in 1993 from $5.3
million in 1992 principally due to a reduction in interest rates on Brown &
Sharpe's borrowings.
Other Income, Net. Other income, net increased to $2.8 million in 1993 from
$2.1 million in 1992. Other income in 1993 included a $2.0 million net gain
on the sale of the machine tool parts and build operations, and other income
in 1992 included a net gain of $0.6 million on the sale of an office building
and an aggregate of $0.6 million on the sale of the pump operation and Brown &
Sharpe's interest in GageTalker.
Page 18
<PAGE>
Income Tax Provision (Benefit). The provisions for income taxes for 1993 and
1992 include foreign, federal, and state income taxes. Income tax expense
totaled $0.8 million in 1993 based on a consolidated pretax loss of $1.6
million. The income tax expense in 1993 resulted largely from profits in the
United States. Brown & Sharpe has substantial loss carryforwards in European
countries and tax credit carryforwards in the United States. In 1992, Brown &
Sharpe recorded a tax benefit of $3.3 million in 1992 on a pretax loss of
$11.2 million, an effective rate of 28.9%.
Seasonality. The capital equipment purchasing cycle in the industries that
purchase the Company's products is such that the fourth quarter calendar year-
end typically represents the largest shipment period as many of its customers
desire to take delivery or products during that period. As a result of the
seasonal impact of the capital goods purchasing cycle,
the effect of which has been accentuated by the Company's acquisition of DEA,
the Company expects to report a loss for the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, Brown & Sharpe has met its liquidity needs, including capital
expenditures, working capital needs, and the funding of operating losses,
through cash generated from operations, sale proceeds of discontinued
businesses, borrowings under secured and unsecured lines of credit, and under
a renewable secured two-year revolving credit facility, "The Facility", from a
commercial lender entered into in June 1993 at $15 million and increased in
September 1994 to $25 million through September 1997 with automatic annual
renewal thereafter, subject to termination provisions in the agreement.
In conjunction with the DEA acquisition which was consummated on September 28,
1994, Brown & Sharpe completed new long-term and short-term financing
arrangements including: an $8.5 million, 5 year term - 10 year amortization,
mortgage secured by Brown & Sharpe's facility in North Kingstown, Rhode
Island; $25 million of three-year term loans with $6.7 million and $18.3
million borrowed from the New York branches of two Italian banks, both loans
having interest as periodically selected by Brown & Sharpe at the rate of
libor plus 0.6% or prime for each of the banks, and both of which loans are
guaranteed by Finmeccanica S.p.A.; and the restructured $15 million secured
revolving credit facility "The Facility", with a commercial lender, that was
increased to $25 million with a maturity date of September 30, 1997 with
automatic annual renewal thereafter and providing for the pledge of additional
collateral, namely 65% of the shares of stock of DEA S.p.A., subject to
termination provisions in the agreement, and also the accounts receivables,
inventories, and certain other assets of the United States subsidiary of DEA
S.p.A. In addition, as part of the DEA acquisition, the Company acquired
$3,232 of debt due to Instituto Mobiliare Italiano (IMI) at interest rates
ranging from 2.1% to 10.1% with repayments through 2000.
Amounts outstanding under Brown & Sharpe's lines of credit are payable on
demand, and certain of the lines extended to Brown & Sharpe's foreign
subsidiaries are secured by other assets. The Facility provides for demand
borrowings based on a percentage of eligible domestic accounts receivable and
finished inventory, is secured by substantially all domestic assets (including
the stock of domestic subsidiaries and 65% of the stock of certain foreign
subsidiaries), and requires maintenance of a minimum current ratio, a maximum
ratio of debt to adjusted net worth, minimum adjusted net worth and minimum
working capital, all as defined. At December 31, 1994, Brown & Sharpe had
borrowings of $19.2 million under the lines of credit compared to total
availability at that date of $62.0 million under the lines of credit including
lines of credit for DEA in an amount of $17.4 million. As of December 31,
1994, there were borrowings of $4.3 million outstanding under the secured
revolving credit facility.
Management believes that the availability of borrowings, following completion
of the DEA acquisition and the new financing arrangements described above,
together with cash flow from current levels of operations and anticipated cost
savings from the integration of DEA, Roch and Mauser, will be sufficient to
meet operational cash requirements (including one-time costs in integrating
Roch, Mauser, and DEA), working capital requirements and planned capital
expenditures well into 1997. However, failure to achieve anticipated cost
savings from the integration of DEA, Roch, and Mauser, or unexpected delays in
or costs related to the integration, could have a material adverse effect on
Brown & Sharpe's liquidity.
Page 19
<PAGE>
Cash Flow. The net loss of $14.3 million in 1994, reduced by depreciation and
other non-cash items of $6.8 million used cash of $7.5 million before net
change in working capital of $2.9 million which resulted in operations using
$10.3 million of cash.
In 1994, investment transactions used cash of $0.8 million, of which capital
expenditures were $5.5 million, as compared with depreciation of $6.4 million
in 1994, and cash pledged of $6.1 million was released in 1994. Proceeds from
the sale of the spares and rebuild operations of $8.7 million in 1993
partially offset capital expenditures of $4.4 million and cash of $6.1 million
which became restricted in support of certain foreign lines of credit
borrowings.
Cash provided from financing transactions was $15.4 million in 1994 compared
to $4.8 million in 1993. This largely resulted from the new financing
described above.
Working Capital. Working capital was $102.9 million at the end of 1994
compared to $46.0 million at the end of 1993. This change resulted largely
from the purchase of DEA which provided about $37.0 million of working
capital. Inventories increased to $88.6 million at December 31, 1994, an
increase of $34.7 million ($33.1 million of which is DEA inventory) from the
end of 1993, and accounts receivable increased to $108.2 million ($72.5
million of which is DEA receivables) at December 31, 1994, an increase of
$63.7 million from year end 1993 which did not require a substantial use of
cash because this primarily resulted from Brown & Sharpe's purchase of Roch
and Mauser at the end of the first quarter of 1994 and DEA at the end of the
third quarter of 1994, both using Brown & Sharpe Shares of Class A Common
Stock. Also, total debt increased $28.1 million to a total of $92.6 million
at December 31, 1994 as compared to $64.5 million outstanding at December 25,
1993 due to debt of Roch and DEA existing at their respective acquisition
dates, increased borrowing to fund operating losses, and foreign currency
exchange rate changes. During 1994, however, short-term debt and current
installments of long-term debt declined $9.4 million causing a corresponding
increase in working capital.
Capital Expenditures. Brown & Sharpe's capital expenditures net of disposal
proceeds were approximately $5.5 million in 1994 compared to $3.8 million in
1993. DEA capital expenditures totaled $1.1 million in 1994 of which $0.8
million was expended prior to its acquisition compared to $2.0 million in
1993. Management estimates that annual capital expenditures of approximately
$6.0 million to $8.0 million are required to tool new products, improve
product and service quality, expand the distribution network, and support the
operations of the combined Company. Planned capital expenditures in 1995 will
include an aggregate of approximately $2.3 million for the construction of a
new facility in Telford, England to replace an existing facility for which the
lease expires and is non-renewable.
Acquisitions and Divestitures. There were no divestitures in 1994, and Roch
and its affiliate, Mauser, were acquired in late March 1994, and DEA S.p.A.
and its subsidiaries were acquired in late September 1994. Proceeds from the
sale of the machine tool parts and rebuild operations completed during the
first half of 1993 provided $8.7 million of cash.
On September 28, 1994, Brown & Sharpe purchased from Finmeccanica S.p.A. the
DEA Group of metrology companies and business units. DEA, headquartered in
Turin, Italy, manufactures and markets worldwide a variety of types of
coordinate measuring machines and systems. Sales of DEA products worldwide in
1994 were $101.4 million, compared to $112.4 million in 1993. (Only DEA
fourth quarter 1994 sales of $37.6 million are included with the Company's net
sales.) Brown & Sharpe issued 3,450,000 shares of Brown & Sharpe Class A
Common Stock with a market value at the closing of $22,856 to Finmeccanica.
This purchase price is subject to a post closing purchase price adjustment.
In connection with the Closing of the DEA Acquisition, Brown & Sharpe and
Finmeccanica entered into a Shareholders' Agreement providing, among other
things, for a limitation on Finmeccanica's percentage ownership of Brown &
Sharpe common stock, a Finmeccanica preemptive right to elect to acquire a
portion of future issuances of stock by Brown & Sharpe in order to maintain
its percentage ownership of Brown & Sharpe on a fully diluted basis (as
defined) until December 31, 1998 (or earlier upon the happening of certain
specified events), and a requirement that Finmeccanica not transfer the
acquired Brown & Sharpe shares to any person other than Brown & Sharpe for a
specified period and affording Brown & Sharpe certain rights of refusal with
respect thereto for a further specified period. Under the Shareholders'
Page 20
<PAGE>
Agreement, Brown & Sharpe's Board of Directors was increased from seven to
ten, and Finmeccanica has three representatives on the Brown & Sharpe Board.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
<TABLE>
<CAPTION>
Index to Financial Statements Page Number
----------------------------- -----------
<S> <C>
Report of Independent Accountants 22
Consolidated Statement of Income (Loss) for the Years Ended
December 31, 1994; December 25, 1993; and December 26, 1992 23
Consolidated Balance Sheet at December 31, 1994 and
December 25, 1993 24
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1994; December 25, 1993; and December 26, 1992 25
Consolidated Statement of Shareowners' Equity for the Years
Ended December 31, 1994; December 25, 1993; and December 26, 1992 26
Notes to Consolidated Financial Statements 27 - 39
</TABLE>
Page 21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Directors
of Brown & Sharpe Manufacturing Company:
We have audited the consolidated financial statements and the financial
statement schedules of Brown & Sharpe Manufacturing Company listed in Item 14
of this Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brown & Sharpe
Manufacturing Company as of December 31, 1994 and December 25, 1993, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 29, 1995
Page 22
<PAGE>
Brown & Sharpe Manufacturing Company
Consolidated Statement of Income (Loss)
For the Years Ended December 31, 1994; December 25, 1993; and December 26,
1992
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales $ 205,000 $157,035 $ 160,695
Cost of goods sold 142,776 110,841 116,283
Selling, general and administrative expense 64,728 45,474 52,509
Restructuring expense 4,169 -- --
--------- -------- ---------
Operating profit (loss) (6,673) 720 (8,097)
Interest expense 6,575 5,100 5,272
Other income, net 1,313 2,764 2,135
--------- -------- ---------
Income (loss) before income taxes (11,935) (1,616) (11,234)
Income tax provision (benefit) 2,400 800 (3,250)
--------- -------- ---------
Net income (loss) $ (14,335) $ (2,416) $ (7,984)
========= ======== =========
Primary and fully diluted net loss per
common share $ (2.37) $ (.49) $ (1.63)
========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 23
<PAGE>
Brown & Sharpe Manufacturing Company
Consolidated Balance Sheet
At December 31, 1994 and December 25, 1993
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,676 $ 2,094
Restricted cash - 6,078
Accounts receivable, net of allowances for doubtful
accounts of $3,103 and $1,320 108,234 44,525
Inventories 88,639 53,963
Deferred income taxes, less valuation allowance
of 38,100 and 13,700, respectively 2,000 1,000
Prepaid expenses and other current assets 5,981 2,031
-------- --------
Total current assets 211,530 109,691
Property, plant and equipment:
Land 6,858 6,398
Buildings and improvements 33,124 32,315
Machinery and equipment 85,583 77,053
-------- --------
125,565 115,766
Less-accumulated depreciation 80,210 72,212
-------- --------
45,355 43,554
Other assets 15,389 12,626
-------- --------
$272,274 $165,871
-------- --------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable and current installments of long-term debt $ 22,398 $ 31,804
Accounts payable 36,896 12,716
Accrued expenses and income taxes 49,353 19,146
-------- --------
Total current liabilities 108,647 63,666
Long-term debt 70,215 32,696
Deferred income taxes 1,737 1,763
Unfunded accrued pension cost 5,035 4,226
Termination indemnities 7,715 --
Shareowners' Equity:
Preferred stock, $1 par value;
authorized 1,000,000 shares -- --
Common stock: Class A, par value $1; authorized 15,000,000
shares; issued 8,122,086 in 1994 and 4,431,890 shares in 1993 8,122 4,432
Class B, par value $1; authorized 2,000,000 shares;
issued 534,821 in 1994 and 547,604 shares in 1993 535 548
Additional paid in capital 66,412 45,710
(Deficit) earnings employed in the business (9,958) 4,377
Cumulative foreign currency translation adjustment 14,530 9,394
Treasury stock; 7,492 shares in 1994
and 8,076 shares in 1993, at cost (151) (163)
Unearned compensation (565) (778)
-------- --------
Total shareowners' equity 78,925 63,520
-------- --------
$272,274 $165,871
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 24
<PAGE>
Brown & Sharpe Manufacturing Company
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1994; December 25, 1993;
and December 26, 1992
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash Provided by (Used in) Operations:
Net Loss $(14,335) $(2,416) $ (7,984)
Adjustment for Noncash Items:
Depreciation and amortization 6,743 6,355 7,330
Pension credits and charges 212 269 762
Deferred income taxes (139) 500 (3,600)
Gain on sale of operations -- (2,182) (628)
Changes in Working Capital:
Accounts receivable (15,912) (8,204) 6,925
Inventories 7,103 957 (577)
Prepaid expenses and other current assets 1,001 323 (859)
Accounts payable and accrued expenses 4,932 (1,455) 2,826
Net assets of discontinued operations -- -- 1,912
-------- ------- --------
Net Cash Provided by (Used in) Operations (10,395) (5,853) 6,107
-------- ------- --------
Investment Transactions:
Acquisitions -- -- (1,604)
Capital expenditures (8,929) (4,399) (12,555)
Proceeds from dispositions 3,456 599 81
Proceeds from sale of operations -- 8,700 3,615
Cash equivalent pledged 6,078 (6,078) --
Other investing activities (1,422) (508) (2,270)
-------- ------- --------
Net Cash (Used in) Investment Transactions (817) (1,686) (12,733)
-------- ------- --------
Financing Transactions:
Increase in long-term and short-term debt 39,584 5,778 4,877
Payment of long-term and short-term debt (24,165) (968) (2,414)
-------- ------- --------
Net Cash Provided by
Financing Transactions 15,419 4,810 2,463
-------- ------- --------
Effect of Exchange Rate Changes on Cash 375 183 456
-------- ------- --------
Cash and Cash Equivalents:
Increase (decrease) during the year 4,582 (2,546) (3,707)
Beginning balance 2,094 4,640 8,347
-------- ------- --------
Ending balance $ 6,676 $ 2,094 $ 4,640
-------- ------- --------
Supplementary Cash Flow Information:
Interest paid $ 6,223 $ 4,942 $ 4,500
-------- ------- --------
Taxes paid $ 1,496 $ 1,158 $ 552
-------- ------- --------
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 25
<PAGE>
Brown & Sharpe Manufacturing Company
Consolidated Statement of Shareowners' Equity
For the Years Ended December 31, 1994; December 25, 1993; and December 26,
1992
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
(Deficit) Cumulative
Common Earnings Foreign
Stock Additional Employed Currency
$1 Par Paid In in the Translation Treasury Unearned
Value Capital Business Adjustment Stock Compensation
<S> <C> <C> <C> <C> <C> <C>
Balance - December 28, 1991 $4,979 $45,710 $ 16,795 $16,280 $(3,496) $ --
Net Loss -- -- (7,984) -- -- --
Treasury stock transactions -- -- (691) -- 1,008 --
Restricted stock awards -- -- (1,226) -- 2,152 (833)
Foreign currency
translation adjustment -- -- -- (6,020) -- --
------- -------- ------- ------- -------- --------
Balance - December 26, 1992 4,979 45,710 6,894 10,260 (336) (833)
------- -------- ------- ------- -------- --------
Net Loss -- -- (2,416) -- -- --
Treasury Stock Transactions -- -- (101) -- 12 --
Restricted Stock Awards 1 -- -- -- 161 55
Foreign currency
translation adjustment -- -- -- (866) -- --
------- -------- ------- ------- -------- --------
Balance - December 25, 1993 4,980 45,710 4,377 9,394 (163) (778)
------- -------- ------- ------- -------- --------
Net Loss -- -- (14,335) -- -- --
Acquisitions 3,625 20,413 -- -- -- --
Treasury Stock Transactions -- -- -- -- 12 --
Restricted Stock Awards 10 (8) -- -- -- 213
ESOP Contribution 42 297 -- -- -- --
Foreign currency
translation adjustment -- -- -- 5,136 -- --
------- -------- ------- ------- -------- --------
Balance - December 31, 1994 $8,657 $66,412 $(9,958) $14,530 $ (151) $ (565)
======= ======== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Page 26
<PAGE>
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
1. Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all subsidiaries. The Company's fiscal year ended on the last day of the
calendar year in 1994 and the last Saturday in December for 1993 and 1992,
respectively. Results for 1994 include 53 weeks, while 1993 and 1992 have 52
weeks. The Company has changed its accounting period ending dates to a
calendar month end and year end basis beginning in 1995. Intercompany
transactions have been eliminated from the consolidated financial statements.
Investments in 20% to 50% part-owned affiliates are accounted for on the
equity method.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market. Cost is determined
principally on a last-in, first-out (LIFO) basis for domestic inventories and
principally on a first-in, first-out (FIFO) basis for inventories outside the
United States. LIFO inventories at December 31, 1994, $7,200, and December 25,
1993, $8,500, were approximately $12,500 and $13,500, respectively, less than
the amounts of such inventories valued on a FIFO basis, which approximates
current cost. Provision is made to reduce slow-moving and obsolete
inventories to net realizable values. Inventory reductions in 1994 and 1993
resulted in the liquidation of LIFO inventory quantities carried at lower
costs which prevailed in prior years as compared with the current cost of
inventory purchases. The effect of this LIFO liquidation was to decrease 1994
and 1993 loss by $602 ($.10 per share) and $749 ($.15 per share),
respectively.
The composition of inventory at year-end was as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Parts, raw materials and supplies $42,665 $14,492
Work in progress 17,069 8,490
Finished goods 28,905 30,981
------- -------
$88,639 $53,963
------- -------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are carried at cost and are being depreciated
principally on a straight-line basis over the estimated useful lives of the
assets which generally range from 20 to 40 years for buildings and
improvements and from 3 to 12 years for machinery and equipment. In 1992, the
Company extended the estimated useful lives of machinery and equipment at its
Swiss subsidiary, based upon the current low rate of utilization. The effect
of this change was to reduce 1992 depreciation expense and net loss by $921 or
$.19 per share. Depreciation expense was $6,442, $5,862, and $6,836 in 1994,
1993, and 1992, respectively. Repair and maintenance costs are charged
against income while renewals and betterments are capitalized as additions to
the related assets. Retirements, sales, and disposals of assets are recorded
by removing the cost and accumulated depreciation from the asset and
accumulated depreciation accounts with any resulting gain or loss reflected in
income. At December 31, 1994, land and buildings with a book value of $20,856
were pledged as collateral for mortgage loans of $27,619.
Page 27
<PAGE>
OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Goodwill $ 2,029 $ 1,654
Training tape masters 2,850 3,420
Prepaid pension 5,106 4,905
Equity investments 1,956 1,551
Other 5,922 4,273
------- -------
17,863 15,803
Less accumulated amortization 2,474 3,177
------- -------
$15,389 $12,626
------- -------
</TABLE>
Goodwill is being amortized on a straight-line basis over periods ranging from
7 to 20 years. Training tape masters are amortized on a straight-line basis
over 3 years.
REVENUE RECOGNITION
The Company records revenue upon shipment other than for long-term contracts,
upon rendering of service for installation and training, and ratably over the
contract period for service contracts.
CONTRACTS IN PROCESS
Sales under long-term contracts are recorded under the percentage of
completion method, wherein costs and estimated gross margin are recorded as
sales as the work is performed. Estimated gross margin is based on the total
contract sales value and the most recent estimate of total costs. When the
current contract estimate indicates a loss, provision is made for the total
anticipated loss.
FOREIGN CURRENCY
Assets and liabilities of those subsidiaries located outside the United States
whose cash flows are primarily in local currencies are translated at year-end
exchange rates and income and expense items are translated at average monthly
rates. Translation gains and losses are accounted for in a separate
shareowners' equity account "Cumulative foreign currency translation
adjustment." The Company enters into forward exchange contracts in
anticipation of future movements in certain foreign exchange rates and to
hedge against foreign currency fluctuations on certain intercompany
transactions and other foreign currency denominated balance sheet positions.
Realized and unrealized gains and losses on these contracts are included in
net income except that gains and losses on contracts to hedge specific foreign
currency commitments are deferred and accounted for as part of the
transaction.
There were no forward exchange contracts outstanding at December 31, 1994 and
December 25, 1993. Other income and expense in 1994, 1993, and 1992 included
$1,064, $88, and $484, respectively, relating to transaction gains.
CREDIT RISK
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments and trade
receivables. The Company places its temporary cash investments with high
credit quality financial institutions and, by policy, limits the amount of
credit exposure to any one financial institution. Concentrations of credit
risk with respect to trade receivables are limited due to the Company's large
number of customers and their dispersion across many different industries and
countries worldwide. At December 31, 1994, the Company had no significant
concentrations of credit risk.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company does not provide postretirement or postemployment benefits as
contemplated by SFAS 106 and SFAS 112, respectively, and accordingly these
statements have no impact upon the Company's financial position or results of
operations.
Page 28
<PAGE>
INCOME TAXES
The Company provides for income taxes under the provisions of SFAS No. 109
"Accounting for Income Taxes", which was adopted at the beginning of 1993,
which requires an asset and liability based approach in accounting for income
taxes.
Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of timing differences of revenue and expense
items for financial statement and income tax purposes. Valuation allowances
are provided against assets which are not likely to be realized. Federal
income taxes are not provided on the unremitted earnings of foreign
subsidiaries since it has been the practice and is the intention of the
Company to continue to reinvest these earnings in the business outside the
United States.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based upon the weighted average number of common
shares outstanding (6,057,090, 4,969,543, and 4,898,536 shares) for 1994,
1993, and 1992, respectively. Common stock equivalents are not included in
the weighted average shares outstanding as they are anti-dilutive.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised of cash on hand, deposits in banks,
and short-term marketable securities with a maturity at acquisition of three
months or less.
2. Acquisitions
DEA
Brown & Sharpe Manufacturing Company, together with its subsidiary Brown &
Sharpe International Capital Corporation, acquired on September 28, 1994, the
stock of DEA S.p.A., an Italian corporation and its related metrology
business, from Finmeccanica S.p.A., an Italian corporation. The business of
DEA S.p.A. and its subsidiaries ("DEA") is headquartered in Turin, Italy. The
acquisition has been accounted for as a purchase. Accordingly, the Company's
consolidated balance sheet at October 1, 1994 includes the assets and
liabilities of DEA S.p.A. and its subsidiaries. The Company's consolidated
statement of net income (loss) and cash flow includes the results of operation
of DEA S.p.A. and its subsidiaries commencing October 2, 1994.
Brown & Sharpe purchased DEA with the delivery to Finmeccanica S.p.A. at the
Closing of 3,450,000 shares of Class A Common Stock of Brown & Sharpe with a
market value of $22,856. The purchase price was determined through
negotiation by the parties. The DEA Acquisition Agreement provides for a
post-closing purchase price adjustment pursuant to which additional shares of
Class A Common Stock of Brown & Sharpe may, under the specified circumstances,
be required to be delivered to Finmeccanica S.p.A. in the event of an increase
in the purchase price. In the case of a decreased purchase price,
Finmeccanica will make a cash payment to the Company. Also, as part of the
purchase, Brown & Sharpe acquired $13,900 of DEA's bank debt. In addition,
the Company incurred professional accounting, legal, and other costs of $2,301
in conjunction with the acquisition which have been accounted for as part of
the purchase price.
The acquisition has been accounted for by the purchase method of accounting,
and accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based on an estimate of their fair values at the date of
acquisition. The book value of the net assets exceeded the purchase price by
approximately $28,500 before adjustment to the fair value as required by
generally accepted
Page 29
<PAGE>
accounting principles. The estimated fair values of assets and liabilities
after this adjustment are summarized as follows:
<TABLE>
<S> <C>
Cash $ 3,040
Accounts receivable 43,710
Inventory 33,964
Other current 5,830
Property, plant, and equipment 2,301
Accounts payable and accruals 41,828
Short-term debt 7,710
Long-term debt 6,190
Other non-current 7,960
-------
$25,157
-------
</TABLE>
ROCH
Brown & Sharpe Manufacturing Company through its subsidiary Brown & Sharpe
International Capital Corporation purchased, on March 24, 1994, the stock of
the French company Ets. Pierre Roch S.A. ("Roch") and its German affiliate,
Mauser Prazisions--Messmittel GmbH ("Mauser"). The business is headquartered
in Luneville, France which is its sole manufacturing site. The German
operation is a sales office. These operations were purchased from Diehl GmbH
& Co. of Nurnberg, Germany ("Diehl").
The purchase price was 175,000 shares of Brown & Sharpe Class A Common Stock,
subject to certain post closing adjustments and the right to receive an
additional 50,000 shares of such stock in the event the Company's Class A
Common Stock attains a market price of $15 or more per share for a total of 30
days or more during any twelve month period within the five years following
the purchase. The purchase price was determined through negotiation by the
parties subject to adjustment based on specified closing balance sheet
changes.
The acquisition has been accounted for by the purchase method of accounting,
and accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based on an estimate of their fair values at the date of
acquisition. The book value of the net assets exceeded the purchase price
before adjustment to the fair value as required by generally accepted
accounting principles by approximately $2,100. The estimated fair values of
assets and liabilities after this adjustment are summarized as follows:
<TABLE>
<S> <C>
Cash $1,408
Accounts receivable 2,647
Inventory 3,398
Other assets 267
Machinery and equipment 726
Accounts payable and accruals 3,988
Short-term debt 1,511
Long-term debt 1,250
Pensions 516
------
$1,181
------
</TABLE>
PROFORMA COMBINED (Unaudited)
The Company's unaudited combined results of operations for the year ended
December 31, 1994 and the year ended December 25, 1993 on a proforma basis
assuming the acquisition of DEA (which was acquired September 28, 1994) and
Roch (which was acquired in late March 1994) occurred at the beginning of 1994
and 1993, respectively are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- --------
<S> <C> <C>
Net sales $272,847 $279,742
Net income (loss) $(11,441) $ 8,924
Primary and fully diluted net income (loss) per common share $ (1.89) $ 1.08
</TABLE>
Page 30
<PAGE>
3. Restructuring Charges
Results of operations for 1994 include charges of $4,169 ($.69 per share as
there was no tax effect). These changes consist principally of Brown & Sharpe
employee severance and Brown & Sharpe sales offices closing costs of $2,348
associated with integrating Brown & Sharpe's existing operations with those of
DEA mainly outside the U.S. Also, costs of $1,821 were recorded for severance
of 38 employees and property, plant, and equipment and inventory write-offs
due to a plant closing in Switzerland arising from the acquisition of Roch in
France.
The severance costs relate to 37 sales and engineering employees not needed as
their services are duplicative and 38 employees in assembly and related
functions in Switzerland. Of these costs, $420 has been paid in 1994, $3,202
shall be paid in 1995, and $547 represents non-cash costs.
4. Income Taxes
Effective the beginning of 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method as required
by SFAS 109. The adoption of the provisions of SFAS 109 in 1993 had no impact
on the Company's reported results of operations or financial position.
Income (loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Domestic $ (1,338) $ 1,394 $ (2,376)
Foreign (10,597) (3,010) (8,858)
--------- -------- --------
Income (loss) before income taxes $ (11,935) $ (1,616) $(11,234)
--------- -------- --------
</TABLE>
The following table reconciles the income tax provision (benefit) at the U.S.
statutory rate to that in the financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Taxes computed at 34% $ (4,058) $ (491) $ (3,997)
Foreign tax on income 1,459 -- --
Alternative minimum and state taxes 250 200 350
Other losses not currently deductible 4,749 1,091 397
-------- ------ --------
Income tax provision (benefit) $ 2,400 $ 800 $ (3,250)
-------- ------ --------
</TABLE>
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Current:
Federal $ 3,250 $ 500 $ 1,150
State 250 300 200
Foreign 800 500 --
-------- ------ --------
4,300 1,300 1,350
Deferred:
Federal (1,000) -- (1,000)
Foreign (900) (500) (3,600)
-------- ------ --------
(1,900) (500) (4,600)
-------- ------ --------
Income tax provision (benefit) $ 2,400 $ 800 $ (3,250)
-------- ------ --------
</TABLE>
Page 31
<PAGE>
The deferred tax benefits reflect deferred tax reductions resulting from
operating losses. Provision has not been made for U.S. taxes on $32,000 of
undistributed earnings of foreign subsidiaries as those earnings are intended
to be permanently reinvested.
The components of the Company's deferred tax assets and liabilities as of
December 31, 1994 and December 25, 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Inventory reserves $ 800 $ 800
Warranty expense 400 400
Provision for doubtful accounts 300 100
Depreciation 800 700
Tax credit and loss carryforwards 37,600 12,300
Other 200 400
------- -------
Gross deferred assets 40,100 14,700
Less valuation allowance 38,100 13,700
------- -------
Deferred tax asset $ 2,000 $ 1,000
------- -------
Deferred tax liabilities:
Pension expense $ 1,500 $ 1,300
Inventory reserves - 700
Other 200 600
------- -------
Deferred tax liability $ 1,700 $ 2,600
------- -------
</TABLE>
A valuation allowance has been established due to the uncertainty of realizing
tax credit and loss carryforwards and a portion of the other deferred tax
assets.
For income tax purposes, the Company has operating loss and capital loss
carryforwards of $2,300 and $1,100, respectively, in the U.K. and net
operating loss carryforwards of $11,200, $22,300, $3,700, and $45,400,
respectively in Switzerland, Germany, France, and Italy. The Swiss and Italian
carryforwards expire between 1995 and 1999. There is no time limit for the
U.K., German, and French carryforwards.
The Company's domestic income tax returns for fiscal years ended 1990-1992 are
under examination by the Internal Revenue Service. The Company believes it
has made adequate provision for assessments which may arise as a result of
this audit.
5. Short-Term Borrowings
Bank and other financial institution lines of credit in effect at December 31,
1994 and December 25, 1993 were $61,997 and $39,731, respectively. The 1994
and 1993 balances include $25,000 and $15,000, respectively of eligible
borrowing under a financing agreement the Company entered into on June 30,
1993 with a commercial lender, which as amended, provides for a revolving
credit facility of up to a maximum of $25,000 through September 1997 with
automatic annual renewal thereafter, subject to termination provisions in the
agreement. The borrowing limit is determined periodically as a portion of the
eligible accounts receivable and finished inventory of the parent company
headquartered in North Kingstown, Rhode Island. Substantially all domestic
assets except the North Kingstown property (land and building) of the Company
are pledged as collateral. The agreement contains covenants which, among
other things, require the Company to maintain certain financial ratios and
restricts the payment of dividends. Subsequent to year end 1994, the Company
secured additional lines of credit of $7,400. The remaining lines of credit
are due upon demand by the lenders. Outstanding borrowings under these lines
were $19,193 at December 31, 1994 and $30,143 at December 25, 1993,
Page 32
<PAGE>
respectively. Short-term debt represents amounts due in U.S. dollars and the
U.S. dollar equivalent of amounts due in foreign currencies. Interest on
these lines of credit is generally from prime or base rate up to 2% above the
prime or base rate of the country in which the amounts are borrowed.
No compensating balances were required at December 31, 1994 and December 25,
1993. Certain foreign lines of credit required the Company to maintain
restricted cash deposit accounts which was zero at the end of 1994 and $6,078
at December 25, 1993. A credit line of $3,287 ((Pounds)2,100) in the U.K. is
collateralized by the assets in that country, and the Company has guaranteed
up to $783 ((Pounds)500). The weighted average interest rates on short-term
borrowings were 7.3% and 8.3% in 1994 and 1993, respectively.
6. Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
9-1/4% convertible subordinated debentures
due December, 2005 $15,000 $16,000
Mortgages at rates ranging from 7 3/4% to 8 3/4% 27,619 18,225
Notes payable 30,801 132
------- -------
73,420 34,357
Less: current installments 3,205 1,661
------- -------
Total long-term debt $70,215 $32,696
------- -------
</TABLE>
The 9-1/4% subordinated debentures are convertible, at the option of the
holders, into common shares at $26.25 per share subject to antidilution
provisions. The Company, through a sinking fund, is required to provide for
retirement of $1,000 in principal amount annually. This will result in
retirement of all but $5,000 prior to maturity. The 1994 and 1993 sinking fund
requirement was met by a call by the trustee for redemption of $1,000
principal amount at par to the debenture holders, using a random selection
process. At December 31, 1994, 571,429 shares of Class A Common Stock were
reserved for conversion of these debentures. At December 31, 1994, there were
mortgage notes outstanding, equivalent to $27,619. Annual maturities of long-
term debt are as follows: 1995 - $3,205, 1996 - $14,246; 1997 - $30,012; 1998
- $3,206; 1999 - $8,258; 2000 through 2005 - $14,493. Interest rates on long-
term debt average about 9%.
On September 28, 1994, in connection with completion of the Company's
acquisition of DEA from Finmeccanica in exchange for 3,450,000 shares of Class
A common stock of the Company, Finmeccanica entered into a Credit Support
Agreement with the Company (the "Credit Support Agreement"). Pursuant to the
Credit Support Agreement, Finmeccanica issued unconditional payment guarantees
on September 28, 1994 to the New York branches of two Italian banks with
respect to their extension of two three-year term loans to the Company in the
aggregate amount of $25,000 bearing interest at a floating rate of LIBOR plus
0.60% with interest payable quarterly and the entire principal amount of such
loans due on September 28, 1997. The Company paid Finmeccanica a one-time fee
of $800 upon entering into the Credit Support Agreement. In the event
Finmeccanica is required to pay such banks any amounts under its guarantees,
subject to the prior repayment by the Company of any amounts due in respect of
certain senior indebtedness (as defined in the Credit Support Agreement),
Finmeccanica will be entitled to reimbursement from the Company of all amounts
paid by Finmeccanica under its guarantees. The Company's reimbursement
obligation is secured by a guarantee by DEA pursuant to an agreement between
DEA and Finmeccanica.
On August 29, 1994, the Company entered into a Mortgage and Security Agreement
with an insurance company for the amount of $8,500 secured by the North
Kingstown land, buildings, and integral fixtures. The term is 5 years with a
10 year amortization schedule.
Page 33
<PAGE>
7. Fair Value of Financial Instruments
The Company values the financial instruments as required by Statement of
Financial Accounting Standards No. 107. The carrying amounts of cash and cash
equivalents, short-term debt, and long-term variable-rate debt approximates
fair value. The fair value of the Company's long-term fixed-rate debt
approximates $14,100 based on the quoted market prices.
8. Contingencies
On November 29, 1991 the U.S. Court of Appeals for the District of Columbia
Circuit rendered its decision on the appeal by the International Association
of Machinists and Aerospace Workers (the "IAM") of the National Labor
Relations Board's ("NLRB") August 28, 1990 decision dismissing unfair labor
practice charges brought against the Company by the IAM arising out of a
strike which began at the Company's Rhode Island operations in October 1981.
The Court although accepting the legal reasoning advanced by the Board and the
Company in support of the Board's 1990 decision dismissing such charges
ordered the NLRB to further clarify and support its decision. The NLRB, on
September 23, 1993, issued its Supplemental Decision, favorable to the Company
again reaffirming its earlier dismissal of the unfair labor practice charges.
The IAM has filed another appeal of that Board decision. The Company is
continuing to defend this case vigorously and has filed its brief in this
latest appeal. Management believes that an ultimate finding of monetary
liability against the Company in this matter is remote.
The Company is involved in two environmental proceedings in which the United
States Environmental Protection Agency ("EPA") identified Brown & Sharpe as a
potentially responsible party ("PRP") at unrelated waste disposal sites (the
"Sites") in Rhode Island and Connecticut listed on the EPA's National Priority
List for clean-up and future monitoring remedial action under the Superfund
legislation. While the Company's proportionate share of the total waste
contributed to both Sites was minimal in volume and toxicity, the EPA
nevertheless with regard to the Rhode Island site issued an Administrative
Order against the Company and other PRP's to clean up the Site. Subsequently,
the Company was permitted by the EPA to settle its liability at such Site in
exchange for releases from the EPA and the State of Rhode Island and
contribution protection from claims of any third parties who may have
liability at the Site. On January 2, 1991, a group of non-settling major
PRP's at the Rhode Island site brought suit in the Federal District Court in
Rhode Island against all of the settling parties, including the Company, to
recover a portion of their past and anticipated future costs of performing the
clean-up remedy. The Court entered a summary judgment in favor of the Company
and other settling parties on October 30, 1992. The non-settling group of
major PRP's appealed that ruling and have subsequently brought suit against
the EPA seeking to have the settlements of the de minimis settling parties set
aside. The Company is vigorously defending this lawsuit and believes that the
release and contribution protection obtained from the EPA in connection with
settlement of its liability at the Site will ultimately bar the cost-recovery
claim. The Company settled its de minimis liability as a PRP at the
Connecticut site in June of 1994 for an amount not deemed to be material.
On March 1, 1995, the Company received a notice from the State of New York
asserting a claim against it, along with a group of approximately ten other
companies, to recover costs incurred by the New York State Department of
Environmental Conservation to clean up a waste disposal site in Poughkeepsie,
NY. The State has alleged that the Company's former subsidiary, Standard Gage
Company, Poughkeepsie, NY, which was merged with and into the Company
contributed hazardous waste to the site for disposal and that the Company is a
potentially responsible party as the surviving corporation to the merger. The
total claim asserted by the State against all parties is approximately
$500,000, and it has offered to settle its claim with all PRP's receiving the
notice. The Company is continuing to investigate the basis for this claim and
estimates that any potential loss it might incur as a result of any
involvement at this site would not be material.
The Company is also involved in several product liability claims and lawsuits
which are incidental to the conduct of its business, the potential liability
for which is adequately covered by insurance or reserves established for such
contingencies. The Company is contesting or defending these claims and suits
Page 34
<PAGE>
and management believes that the ultimate liability, if any, resulting from
these matters will not have a material effect on the Company's financial
position.
9. Preferred Stock
The Board of Directors is empowered to provide from time to time for issuance
of one or more series of preferred shares without further shareowner action
and to fix various terms and provisions with respect to each such series,
including, without limitation, the dividend rate, redemption prices, terms of
any sinking fund, conversion rights, if any, voting rights, if any, and rights
of the holders upon liquidation (See Note 16 - Preferred Stock Purchase
Rights).
10. Incentive and Retirement Plans
STOCK INCENTIVE PLANS
Under the provisions of the Company's 1989 Equity Incentive Plan, a variety of
cash, common stock, stock option, and other stock based incentive awards are
available for grant. The Equity Incentive Plan permits the granting of both
options which do, and options which do not, qualify as incentive stock options
under the Internal Revenue Code. During 1994 and 1993, respectively, a total
of 10,000 and 8,000 shares of restricted Class A common stock, issuing new
shares for the 1994 award and utilizing shares held in the Treasury, for the
1993 award under the Plan. During 1994, 145,000 shares of Class A common
stock were issued as options. The shares are subject to forfeiture upon the
recipients' termination of employment over a five year period, with the
restriction lapsing in amounts of 25% at the end of the 2nd and 3rd years, and
50% at the end of the 5th year. Unearned compensation in the amount of $926
is being amortized to expense over the forfeiture lapsing period. In 1990 and
1991, options to purchase a total of 80,000 shares of Class A common stock
were granted for a ten year period at prices between $11 and $12.125 per
share. The aggregate remaining amount of shares of Class A common stock that
may be issued under the Equity Incentive Plan is 61,600. The price for shares
covered by options is 100% of the market value on the dates such options are
granted.
No further options or other awards may be granted under the Company's amended
1973 Stock Option Plan. The exercise price for shares covered by outstanding
options under the 1993 Stock Option Plan is 100% of the market value on the
dates such options were granted. Options granted under this plan are
exerciseable one year after the date of grant and expire at the end of ten
years. On December 31, 1994, 50,000 option shares were exerciseable. Option
activity under the Plans during the past three years is summarized as follows:
<TABLE>
<CAPTION>
Shares Price Range
<S> <C> <C>
Outstanding December 28, 1991 171,457 $10.25 to $20.81
Forfeited or canceled (26,265) 12.13 to $ 0.81
--------
Outstanding December 26, 1992 145,192 $10.25 to $17.86
Forfeited or canceled (21,666) 10.78 to $ 2.13
--------
Outstanding December 25, 1993 123,526 $10.25 to $17.86
--------
Granted 145,000 $ 6.50
Forfeited or canceled (50,529) $12.47 to $ 3.10
--------
Outstanding December 31, 1994 217,997 $ 6.50 to $17.86
--------
</TABLE>
PROFIT INCENTIVE PLAN
Under the provisions of the Company's Profit Incentive Plan, cash may be
awarded as bonuses to certain management employees. Prior to amendment of the
Plan in 1994, shares of Class A Common Stock, valued at 100% of their market
value on the date of the award, could also be awared. Provisions regarding
forfeiture of rights to all or part of the stock awards and restrictions
regarding sale or disposition of shares lapse in equal annual installments
over a five-year period commencing one year after the date of award, and
compensation expense is recognized ratably over the vesting period. The
aggregate amount of additional shares which may be issued under the Plan may
not exceed 116,200 shares, net of forfeitures, and is subject to adjustments
Page 35
<PAGE>
in the event of stock splits and other changes. Plan cash awards amounted to
$310, $601, and $53 in 1994, 1993, and 1992, respectively. There were no
stock awards in any of these years.
SAVINGS PLANS
The Company has 401(K) stock bonus and thrift savings plans for U.S.
employees, which include retirement income features consisting of employer
contributions and employee tax deferred contributions. Contributions under
all plans are invested in professionally managed portfolios and Company stock.
The savings plans' expense for 1994, 1993, and 1992 was $793, $705, and $739,
respectively.
STOCK OWNERSHIP PLAN
Under the provisions of the Company's Employee Stock Ownership Plan (ESOP),
the Company may make contributions of common stock or cash to purchase common
stock from the Company or otherwise, to be held in trust for employees meeting
certain eligibility requirements until the employees reach retirement age.
The ESOP may also borrow funds to purchase common shares, for which the
Company will contribute amounts as necessary to pay down the indebtedness.
ESOP expense was $360 in 1994, $327 in 1993 and $347 in 1992. At December 31,
1994, there were no unallocated shares of Class A and B stock held in the ESOP
as all shares were allocated to participants' accounts.
RETIREMENT PLANS
The Company's subsidiaries have several defined contribution retirement plans
covering employees in the U.S. and Switzerland, and two defined benefit
retirement plans covering employees in the U.K. and Germany, which includes
substantially all employees. Retirement plan expense net of pension income
for 1994, 1993, and 1992 was $1,593, $1,223, and $2,488, respectively.
The defined benefit plans which cover employees in the U.K. and Germany,
respectively, provide benefits based on years of service and employee
compensation. Retirement costs under both plans are compiled based on the
projected unit credit actuarial method.
The U.K. plan's actuarial assumptions used settlement rates of 9.0% at the end
of 1994 and 7.5% at the end of 1993, a long-term return on assets of 8% at the
beginning of 1994 and 10% at the beginning of 1993, and annual wage increases
of 8.0% at the end of 1994 and 6.5% at the end of 1993. Retirement costs
accrued are funded.
The German plan's actuarial assumptions used a settlement rate of 7.5% and an
annual wage increase of 4.5% at the end of 1994 and 1993. Retirement costs
accrued are not funded.
The following items are the components of net periodic pension income for the
U.K. plan for the years ended December 31, 1994; December 25, 1993; and
December 26, 1992:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost-benefits earned $ 797 $ 664 $ 815
Interest cost on projected benefit obligations 943 743 1,075
Return on plan assets, net 1,007 (1,200) (1,952)
Net amortization and deferral (2,948) (345) (465)
------- ------- --------
Net periodic pension income $ (201) $ (138) $ (527)
======= ======= ========
</TABLE>
The plan has assets in excess of the accumulated benefit obligations. Plan
assets include investments in equity securities, corporate and government debt
securities, and cash equivalents. The following table
Page 36
<PAGE>
presents a reconciliation of the funded status of the plan at December 31,
1994; December 25, 1993; and December 26, 1992:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Vested and accumulated benefit obligation $(16,311) $(14,571) $(13,164)
Projected benefit obligation (18,420) (16,680) (15,273)
Plan assets at fair value 31,290 26,401 24,511
-------- -------- --------
Funded status 12,870 9,721 9,238
Unrecognized portion of net assets (7,764) (4,816) (4,471)
-------- -------- --------
Prepaid pension $ 5,106 $ 4,905 $ 4,767
-------- -------- --------
</TABLE>
The following items are the components of net periodic pension cost for the
unfunded German plan for the years ended December 31, 1994; December 25, 1993;
and December 26, 1992:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost-benefits earned $ 97 $ 112 $ 818
Interest cost on projected benefit obligations 316 295 394
------- ------- -------
Net periodic pension cost $ 413 $ 407 $ 1,212
------- ------- -------
Vested and accumulated benefit obligation $(3,330) $(3,233) $(3,121)
------- ------- -------
Projected benefit obligation $(4,617) $(4,012) $(4,083)
Unrecognized net gain (418) (214) -
------- ------- -------
Unfunded accrued pension cost $(5,035) $(4,226) $(4,083)
------- ------- -------
</TABLE>
TERMINATION INDEMNITIES
Under Italian law, the Company accrues one month equivalent wages for each
year of employee service. Such liability, which is unfunded, must be paid
upon termination of employment.
11. Research and Development Expense
Research and development expense was $9,220, $8,669, and $10,903 in 1994,
1993, and 1992, respectively.
12. Other Income and Expense
Other income (expense), net includes:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Interest income $ 468 $ 266 $ 457
Gain (loss) on sale of fixed assets (284) 44 655
Foreign currency gains 1,064 157 484
Gain on sale of operations - 2,182 628
Other income (expense) 65 115 (89)
------ ------ ------
$1,313 $2,764 $2,135
------ ------ ------
</TABLE>
Operations sold in 1993 were spares and rebuild, and in 1992 were GageTalker
and pump.
Page 37
<PAGE>
13. Rental Expense and Lease Commitments
At December 31, 1994, the Company was obligated under operating leases
expiring on various dates. Rental expense was $4,157, $3,845 and $4,684 in
1994, 1993, and 1992, respectively. Annual rental commitments under
noncancelable leases pertaining principally to buildings and equipment at
December 31, 1994 are $6,431, $4,465, $3,125, $1,230, and $699 for the years
1995 through 1999, and aggregate to $825 for all years subsequent to 1999.
In addition, DEA is the lessee under a lease agreement with the Elsag Bailey
Division of Finmeccanica with respect to its principal headquarters facility
located in Moncalieri, Italy. The lease expires on December 31, 1997, and the
annual rental amount under such lease is approximately Lire 1,400 million or
approximately $650,000.
14. Financial Information by Business Segment and Geographic Area
Financial Information by Business Segment and Geographic Area as set forth on
pages 11 and 12 in Item 1 of this Annual Report is an integral part of these
financial statements.
15. Common Stock
Both classes of common stock have equal rights upon liquidation. Class A
common stock may not receive less cash dividends per share than Class B common
stock, nor may such dividends be less frequent. The Class A common stock has
one vote per share. Except as otherwise provided by law, the Class B common
stock has ten votes per share, and the Class B common stock is convertible
into Class A common stock on a one-for-one basis, and can be transferred in
Class B form only to specified transferees, generally members of a
shareowner's family and certain others affiliated with a shareowner. During
1994 and 1993, 12,783 shares and 73,597 shares, respectively, were converted
from Class B to Class A common stock.
During 1994 and 1993, respectively, 584 and 8,000 treasury shares were
allocated for use as restricted stock awards, and 584 treasury shares were
issued under a Directors' deferred compensation plan.
16. Preferred Stock Purchase Rights
On March 23, 1988, the Company distributed a dividend of one purchase right
for each outstanding share of common stock. Until the occurrence of specified
events, the rights are represented by the associated common stock
certificates. Following the distribution of the Class B common stock on June
10, 1988, and until the occurrence of specified events, each certificate
representing a share of Class A or Class B common stock also represents three-
quarters of a right. Each right entitles the shareowner to buy from the
Company one-hundredth of a share of Series A Participating Preferred Stock at
an exercise price of $55 per right. The rights become exerciseable ten days
after a party acquires 20% of the Company's common stock. The rights, which
are subject to adjustment, may be redeemed by the Company at a price of $.03
per right at any time prior to the fifteenth day after a person acquires 20%
of the Company's common stock. The rights expire on March 23, 1998.
In the event the Company is involved in certain business combination
transactions with a 20% shareowner, each right will entitle its holder (other
than a 20% shareowner) to purchase, at the right's then exercise price, an
equity interest in the acquiring person having a market value of two times the
exercise price. In the event a 20% shareholder engages in certain other
transactions with the Company or (pursuant to a February, 1989 amendment) any
person becomes a 20% shareowner, each right will entitle its holder (other
than a 20% shareowner) to purchase, at the right's then exercise price, shares
of Class A common stock having a market value of two times the exercise price.
Prior to the DEA acquisition and entering into the Shareholders Agreement
between the Company and Finmeccanica, the Company amended the Rights Agreement
between it and the First National Bank of Boston dated March 9, 1988 pursuant
to authority reserved in such agreement to exclude Finmeccanica from the
Page 38
<PAGE>
definition of an "Acquiring Person" under the Rights Agreement so long as it
does not own shares of Class A Stock other than those acquired in connection
with the DEA acquisition and as provided in the Shareholders Agreement.
17. Other Matters
During the first quarter of 1994, the Company changed its method of accounting
from the completed contract method to the percentage-of-completion accounting
method for its large machinery construction contracts for its European
operations. This conforms the worldwide accounting to the U.S. reporting
percentage-of-completion basis. Management believes that this method more
appropriately reports revenue and costs in related accounting periods rather
than recognizing substantially all revenue and cost at the time of shipment.
Information with respect to the quarter and year ended December 25, 1993 has
been restated to reflect this change in accounting. The effect of this
restatement was to increase retained earnings at December 25, 1993 by $294.
Net income for the year 1994 was increased by $650 ($.11 per share), net
income for the year 1993 was decreased by $172 ($.03 per share), and net
income for the year 1992 was increased by $523 ($.11 per share).
18. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
1994
-----------------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year End
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 36,659 $43,152 $39,641 $ 85,548 $205,000
Gross profit 10,719 13,755 11,031 26,719 62,224
Net income (loss) (2,874) (1,368) (4,615) (5,478) (14,335)
Earnings (loss) per common share $ (.57) $ (.26) $ (.86) $ (.63) $ (2.37)
1993
-----------------------------------------------------
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Year End
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 39,758 $40,003 $32,935 $ 44,339 $157,035
Gross profit 11,310 13,482 8,404 12,998 46,194
Net income (loss) 1,228 215 (4,270) 411 (2,416)
Earnings (loss) per common share $ .25 $ .04 $ (.86) $ .08 $ (.49)
</TABLE>
Page 39
<PAGE>
ITEM 9 - DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
-------- ----------------------------------------------------------
DISCLOSURE
----------
None.
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
Directors
---------
Refer to "INFORMATION WITH RESPECT TO NOMINEES AND OTHER DIRECTORS CONTINUING
IN OFFICE" in the Company's definitive Proxy Statement for the May 3, 1995
Annual Meeting which is incorporated herein by reference.
Executive Officers
------------------
Refer to Item 4A of this Annual Report on Form 10-K for information regarding
Executive Officers.
ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS
--------------------------------------------------
Refer to "EXECUTIVE COMPENSATION" in the Company's definitive Proxy Statement
for the May 3, 1995 Annual Meeting which is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
Refer to "Principal Shareholders" and "STOCK OWNERSHIP OF DIRECTORS AND
OFFICERS" in the Company's definitive Proxy Statement for the May 3, 1995
Annual Meeting which are incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Refer to "CERTAIN RELATIONSHIPS" in the Company's definitive Proxy Statement
for the May 3, 1995 Annual Meeting which is incorporated herein by reference.
PART IV
-------
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------
Financial Statements filed in Item 8 of this Annual Report
----------------------------------------------------------
Consolidated Statement of Income (Loss) for the Years Ended
December 31, 1994; December 25, 1993; and December 26, 1992
Consolidated Balance Sheet at December 31, 1994 and
December 25, 1993
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1994; December 25, 1993; and December 26, 1992
Consolidated Statement of Shareowners' Equity for the Years
Ended December 31, 1994; December 25, 1993; and December 26, 1992
Notes to Consolidated Financial Statements
Page 40
<PAGE>
Financial Statement Schedules
-----------------------------
Schedule II - Valuation and Qualifying Accounts
Statements and Schedules Omitted
--------------------------------
Individual financial statements of the Registrant's subsidiaries are omitted
because the Registrant is primarily an operating Company and all subsidiaries
included in the consolidated financial statements are wholly-owned
subsidiaries.
Schedules other than those listed above are omitted because they are not
required, are not applicable, or the information is included in the financial
statements.
Exhibits
--------
Exhibits have been filed separately with the Securities and Exchange
Commission in connection with this Annual Report on Form 10-K or have been
incorporated into the report by reference. A list briefly describing such
Exhibits has been enclosed in this Annual Report.
Reports on Form 8-K
-------------------
On October 13, 1994, Brown & Sharpe filed a Current Report on Form 8-K under
Item 2 reporting the September 28, 1994 acquisition of all of the stock of DEA
S.p.A. from Finmeccanica S.p.A.
Page 41
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
BROWN & SHARPE MANUFACTURING COMPANY
(Registrant)
Date: March 30, 1995 By: /s/ Charles A. Junkunc
-------------- ----------------------
Charles A. Junkunc
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Henry D. Sharpe, Jr. 3/30/95 /s/ Howard K. Fuguet 3/30/95
------------------------ ------- -------------------- -------
Henry D. Sharpe, Jr. Date Howard K. Fuguet Date
Chairman of the Board and Director Director
/s/ Fred M. Stuber 3/30/95 /s/ John M. Nelson 3/30/95
------------------ ------- ------------------ -------
Dr. Fred M. Stuber Date John M. Nelson Date
President, Chief Executive Officer Director
(Principal Executive Officer)
and Director
/s/ Paul R. Tregurtha 3/30/95 /s/ Russell A. Boss 3/30/95
--------------------- ------- ------------------- -------
Paul R. Tregurtha Date Russell A. Boss Date
Director Director
/s/ Henry D. Sharpe, III 3/30/95 /s/ Enrico Albareto 3/30/95
------------------------ ------- ------------------- -------
Henry D. Sharpe, III Date Enrico Albareto Date
Director Director
/s/ Vincenzo Cannatelli 3/30/95 /s/ Alberto de Benedictis 3/30/95
----------------------- ------- ------------------------- -------
Vincenzo Cannatelli Date Alberto de Benedictis Date
Director Director
/s/ John M. Lochner 3/30/95 /s/ Charles A. Junkunc 3/30/95
------------------- ------- ---------------------- -------
John M. Lochner Date Charles A. Junkunc Date
Controller Vice President and
(Principal Accounting Officer) Chief Financial Officer
(Principal Financial Officer)
Page 42
<PAGE>
DIRECTORS
---------
Enrico Albareto, Chief Executive Officer, Elsag Bailey, S.p.A.
Russell A. Boss, Director and President & Chief Executive Officer, A. T. Cross
Company
Vincenzo Cannatelli, Group Executive Vice President, Elsag Bailey, Inc.
Alberto de Benedictis, Senior Vice President, North America, Finmeccanica
S.p.A.
Howard K. Fuguet, Partner, Ropes & Gray
John M. Nelson, Chairman & Chief Executive Officer, Wyman-Gordon Company
Henry D. Sharpe, Jr., Chairman of the Board, Brown & Sharpe Manufacturing
Company
Henry D. Sharpe, III, Co-founder & Technical Director, Design Lab, Inc.
Dr. Fred M. Stuber, President & Chief Executive Officer, Brown & Sharpe
Manufacturing Company
Paul R. Tregurtha, Chairman and Chief Executive Officer and Co-owner, Mormac
Marine Group, Inc.
OFFICERS
--------
Henry D. Sharpe, Jr., Chairman of the Board
Dr. Fred M. Stuber, President & Chief Executive Officer
Charles A. Junkunc, Vice President & Chief Financial Officer
Antonio Aparicio, Vice President & General Manager - Precision Measuring
Instruments
Dr. John Cooke, Vice President & General Manager - Custom Metrology
Richard F. Paolino, Vice President & General Manager - Measuring Systems
Andrew Barclay, Vice President
Karl J. Lenz, Vice President
John L. Eppich, Treasurer
James W. Hayes, III, Secretary & Corporate Counsel
John M. Lochner, Controller
William H. Todd, Jr., Assistant Secretary
INVESTOR INFORMATION
--------------------
Annual Meeting: The annual meeting of Shareowners will be held May 3, 1995 at
10:00 a.m. at the Corporate Offices
Corporate Offices: Precision Park, 200 Frenchtown Road, North Kingstown, RI
02852; Telephone (401) 886-2000
Page 43
<PAGE>
Form 10-K Report: A copy of the Company's Annual Report as filed with the
Securities and Exchange Commission is available upon request to the Secretary.
Stock Listing: New York Stock Exchange; Symbol BNS
Trustee and Registrar for the 9-1/4% Convertible Subordinated Debentures:
Morgan Guaranty Trust Company, 30 West Broadway, New York, NY 10015
Transfer Agent and Registrar Common Stock: The First National Bank of Boston,
Shareholders' Services Division, Post Office Box 1865, Boston, MA 02102
Page 44
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
------------------------------------
Schedule II - Valuation and Qualifying Accounts
-----------------------------------------------
(dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Foreign Balance at
Beginning Costs and Currency End of
Year Ended of Period Expenses Deductions Translation Period
---------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
(2) (1)
December 31, 1994
-------------------
Allowance for doubtful accounts $1,320 $2,833 $1,117 $ 67 $3,103
December 25, 1993
-----------------
Allowance for doubtful accounts $1,452 $ 264 $ 358 $(38) $1,320
December 26, 1992
-----------------
Allowance for doubtful accounts $1,407 $ 514 $ 388 $(81) $1,452
</TABLE>
(1) Adjustment resulting from translating allowance for doubtful accounts of
foreign subsidiaries at year-end exchange rates.
(2) Write-offs of uncollectible accounts.
Page 45
<PAGE>
Exhibit Index
-------------
Number
------
3.1 Joint Agreement of Merger between Brown & Sharpe Manufacturing
Company, incorporated in Rhode Island, and Brown & Sharpe
Manufacturing Company, the surviving corporation incorporated in
Delaware, filed as the only Exhibit to Form 8-K for the month of
January, 1969, and such is hereby incorporated by reference.
3.2 Amendment to Certificate of Incorporation, dated April 27, 1979,
filed as Exhibit 13 to Form 10-K for the period ending December 29,
1979, and such is hereby incorporated by reference.
3.3 Amendment to Certificate of Incorporation, Dated April 25, 1980,
filed as Exhibit 3.1 to Form 10-Q for the period ending June 28, 1980,
and such is hereby incorporated by reference.
3.4 Amendment to Certificate of Incorporation dated April 24, 1987.
Exhibit 3.7 was filed as Exhibit 10.4 to Form 10-Q for the period
ended June 27, 1987, and such is hereby incorporated by reference.
3.5 Amendment to Certificate of Incorporation dated May 6, 1988 filed as
Exhibit 1 to Current Report on Form 8-K filed May 9, 1988 and such is
hereby incorporated by reference.
3.6 Certificate of Designation filed as Exhibit A to Exhibit 5 of
Amendment on Form 8 filed on March 6, 1989, and such is hereby
incorporated by reference.
3.7 Amendment to Certificate of Incorporation dated May 2, 1989. Exhibit
3.7 was filed as Exhibit 3.7 to the Form 10-K for the year ended
December 30, 1989 and such is hereby incorporated by reference.
3.8 By-laws of Brown & Sharpe Manufacturing Company, as amended through
July 29, 1994; previously filed as Exhibit 3.1 to the Form 10-Q for
the quarter ended July 2, 1994 and such is hereby incorporated by
reference.
3.9 Amendments to By-laws of Brown & Sharpe Manufacturing Company, as of
September 28, 1994; previously filed as Exhibit 3 to the Form 10-Q for
the quarter ended October 1, 1994 and such is hereby incorporated by
reference.
4.1 Indenture dated October 1, 1980 (including form of debenture) between
the Company and Morgan Guaranty Trust Company of New York as Trustee
relating to 9 1/4% convertible subordinated debentures due December
15, 2005, filed as Exhibit 2 to Form 8-A dated October 8, 1980 and
such is hereby incorporated by reference.
The Registrant hereby agrees to furnish to the Commission upon request
copies of any long-term debt instruments not filed herewith because
the securities authorized under any such instrument do not exceed ten
percent of total assets of the Registrant and its Consolidated
Subsidiaries.
+10.1 Amended Profit Incentive Plan, as amended through March 9, 1988.
Exhibit 10.1 was filed as Exhibit 10.1 to the Form 10-K for the year
ended December 31, 1988, and is hereby incorporated herein by
reference.
+10.2 Amended 1973 Stock Option Plan, as amended through March 9, 1988.
Exhibit 10.2 was filed as Exhibit 10.2 to the Form 10-K for the year
ended December 31, 1988, and is hereby incorporated herein by
reference.
Page 46
<PAGE>
+10.3 Amendment dated December 29, 1990 to the Brown & Sharpe Amended
1973 Stock Option Plan. Exhibit 10.3 was filed as Exhibit 10.3 to the
Form 10-K for the year ended December 29, 1990 and such is herein
incorporated by reference.
+10.4 Amendment No. 4 of the Restated Brown & Sharpe Employee Stock
Ownership and Profit Participation Plan and Trust Agreement, as
amended through December 21, 1990. Exhibit 10.4 was filed as Exhibit
10.4 to the Form 10-K for the year ended December 29, 1990; and is
hereby incorporated herein by reference.
10.5 (Intentionally omitted)
10.6 (Intentionally omitted)
+10.7 Deferred Stock Equivalent Unit Contract dated December 31, 1982
between Brown & Sharpe Manufacturing Company and Donald A. Gaudion.
Exhibit 10.7 was filed as Exhibit 10.24 to Form 10-K for the period
ended December 25, 1982, and such is hereby incorporated by reference.
+10.8 (Intentionally omitted)
+10.9 The Brown & Sharpe Savings and Retirement Plan for Management
Employees dated October 7, 1987.
10.10 The Brown & Sharpe Savings and Retirement Plan dated October 7, 1987.
+10.11 Amendment and Restatement of the Brown & Sharpe Employee Stock
Ownership and Profit Participation Plan and Trust Agreement dated
October 7, 1987.
Exhibits 10.9 through 10.11 were filed as Exhibits 10.2 through 10.4
respectively, to Form 10-Q for the period ended September 26, 1987 and
such are hereby incorporated by reference.
10.12 Preferred Stock Rights Agreement dated as of March 9, 1988, between
the Company and The First National Bank of Boston, as Rights Agent.
Exhibit 10.12 was filed as Exhibits 1-4 to the Registration Statement
on Form 8-A filed on April 28, 1988, and is hereby incorporated herein
by reference.
10.13 Amendment No. 1, dated as of May 2, 1988, to Preferred Stock Rights
Agreement. Exhibit 10.13 was filed as Exhibit 5 to Amendment No. 1 on
Form 8, filed on March 6, 1989, to the Registration Statement on Form
8-A filed on April 28, 1988, and is hereby incorporated herein by
reference.
10.14 Amendment No. 2, dated as of February 24, 1989, to Preferred Stock
Rights Agreement. Exhibit 10.14 was filed as Exhibit 6 to Amendment
No. 1 on Form 8, filed on March 6, 1989, to the Registration Statement
on Form 8-A filed on April 28, 1988, and is hereby incorporated herein
by reference.
+10.15 Amendment dated February 23, 1989 to The Brown & Sharpe Savings and
Retirement Plan for Management Employees.
+10.16 Amendment No. 2, dated October 19, 1988, to The Brown & Sharpe Savings
and Retirement Plan for Management Employees.
+10.17 Amendment No. 3, dated February 23, 1989, to The Brown & Sharpe
Savings and Retirement Plan for Management Employees.
Page 47
<PAGE>
10.18 Amendment dated February 23, 1989 to The Brown & Sharpe Savings and
Retirement Plan.
10.19 Amendment No. 2, dated October 19, 1988, to The Brown & Sharpe Savings
and Retirement Plan.
10.20 Amendment No. 3, dated February 23, 1989, to The Brown & Sharpe
Savings and Retirement Plan.
+10.21 Amendment dated February 23, 1989, to the Restated Brown & Sharpe
Employee Stock Ownership and Profit Participation Plan and Trust
Agreement.
+10.22 Amendment No. 2, dated October 19, 1988 to the Restated Brown & Sharpe
Employee Stock Ownership and Profit Participation Plan and Trust
Agreement.
+10.23 Amendment No. 3, dated February 23, 1989 to the Restated Brown &
Sharpe Employee Stock Ownership and Profit Participation Plan and
Trust Agreement.
Exhibits 10.15 through 10.23 were filed as Exhibits 10.19 through
10.27, respectively, to the Form 10-K for the year ended December 31,
1988, and are hereby incorporated herein by reference.
+10.24 Amended 1989 Equity Incentive Plan as amended through February 21,
1992. Exhibit 10.24 was filed as Exhibit 10.24 to the Form 10-K for
the year ended December 28, 1991 and such is hereby incorporated by
reference.
+10.25 Deferred Stock Equivalent Unit Contract dated September 3, 1987
between Brown & Sharpe Manufacturing Company and Paul R. Tregurtha.
Exhibit 10.25 was filed as Exhibit 10.24 to the Form 10-K for the year
ended December 30, 1989 and such is herein incorporated by reference.
+10.26 Form of amendment dated April 30, 1991 to Deferred Stock Equivalent
Unit Contract dated September 3, 1987 between Brown & Sharpe
Manufacturing Company and Paul R. Tregurtha. Exhibit 10.26 was filed
as Exhibit 10.26 to the Form 10-K for the year ended December 28, 1991
and such is hereby incorporated by reference.
+10.27 Deferred Stock Equivalent Unit Contract dated November 30, 1989
between Brown & Sharpe Manufacturing Company and Herbert A. Beyer.
Exhibit 10.27 was filed as Exhibit 10.25 to the Form 10-K for the year
ended December 30, 1989 and such is hereby incorporated by reference.
+10.28 Form of amendment dated April 30, 1991 to Deferred Stock Equivalent
Unit Contract Dated November 30, 1989 between Brown & Sharpe
Manufacturing Company and Herbert A. Beyer. Exhibit 10.28 was filed
as Exhibit 10.28 to the Form 10-K for the year ended December 28, 1991
and such is hereby incorporated by reference.
+10.29 Amendment No. 4, dated October 20, 1989, to Brown & Sharpe Savings
and Retirement Plan for Management Employees. Exhibit 10.29 was filed
as Exhibit 10.26 to the Form 10-K for the year ended December 30, 1989
and such is hereby incorporated by reference.
10.30 Amendment No. 4, dated October 30, 1989, to Brown & Sharpe Savings
and Retirement Plan. Exhibit 10.30 was filed as Exhibit 10.27 to the
Form 10-K for the year ended December 30, 1989 and such is hereby
incorporated by reference.
10.31 Amendment No. 5, dated September 7, 1990, of the Brown & Sharpe
Savings and Retirement Plan. Exhibit 10.31 was filed as Exhibit 10.30
to the Form 10-K for the year ended December 29, 1990 and such is
hereby incorporated by reference.
Page 48
<PAGE>
+10.32 Amendment No. 5, dated September 7, 1990, of the Brown & Sharpe
Savings and Retirement Plan for Management Employees. Exhibit 10.32
was filed as Exhibit 10.31 to the Form 10-K for the year ended
December 29, 1990 and such is hereby incorporated by reference.
10.33 The acquisition agreement pertaining to the acquisition of Wild
Leitz Messtechnik GmbH and The Marketing and Sales Assets of the IMT
Division of LEICA plc by Brown & Sharpe Manufacturing Company, dated
June 29, 1990, was filed as Exhibit 10.1 to Form 10-Q for the period
ended June 30, 1990 and is hereby incorporated herein by reference.
+10.34 Employment/severance agreement dated March 14, 1988 between Brown &
Sharpe Manufacturing Company and Richard J. Duncan.
+10.35 Employment/severance agreement dated May 29, 1990, amended
February 3, 1992, between Brown & Sharpe Manufacturing Company and
Richard J. Duncan.
+10.36 Employment/severance agreement dated March 14, 1988 between Brown &
Sharpe Manufacturing Company and Richard F. Paolino.
+10.37 Employment/severance agreement dated March 14, 1988 between Brown &
Sharpe Manufacturing Company and John M. Lochner.
Exhibits 10.34 through 10.37 were filed as Exhibits 10.34 through
10.37, respectively, to the Form 10-K for the year ended December 28,
1991, and are hereby incorporated by reference.
+10.38 The sales agreement pertaining to the sale of GageTalker Corporation
to P. Eric Berg by Brown & Sharpe Manufacturing Company dated January,
1992. Exhibit 10.38 was filed as Exhibit 10.38 to the Form 10-K for
the year ended December 28, 1991 and is hereby incorporated by
reference.
+10.39 Consulting Agreement between Brown & Sharpe Manufacturing Company and
Henry D. Sharpe, Jr. (Chairman of the Board of Directors), dated May
18, 1990.
+10.40 Amendment No. 5 of the Restated Brown & Sharpe Employee Stock
Ownership and Profit Participation Plan and Trust Agreement, as
amended through March 23, 1991.
+10.41 Employment/Severance Agreement dated April 23, 1992 between Brown &
Sharpe Manufacturing Company and Charles A. Junkunc.
+10.42 Amendment dated July 24, 1992 to Employment/Severance Agreement dated
April 23, 1992 between Brown & Sharpe Manufacturing Company and
Charles A. Junkunc.
+10.43 Amendment dated November 11, 1992 to 1989 Equity Incentive Plan as
amended through November 6, 1992.
Exhibits 10.38 through 10.43 were filed as Exhibits 10.38 through
10.43, respectively, to the Form 10-K for the year ended December 26,
1992, and are hereby incorporated by reference.
10.44 The Share Purchase and Transfer agreement dated March 24, 1994 by
and between Diehl GmbH & Co. and Brown & Sharpe Manufacturing Company
was filed as Exhibit (c) to Form 8-K filed as of May 13, 1994, and is
hereby incorporated by reference.
10.45 The Acquisition Agreement pertaining to the acquisition of DEA dated
as of June 10, 1994 between Brown & Sharpe Manufacturing Company and
Finmeccanica S.p.A.
Page 49
<PAGE>
10.46 The Form of Shareholders Agreement to be entered into between Brown &
Sharpe Manufacturing Company and Finmeccanica, S.p.A.
10.47 Amendment No. 3, dated June 16, 1994, to Rights Agreement, dated
March 9, 1988 between Brown & Sharpe Manufacturing Company and the
First National Bank of Boston, as Rights Agent.
Exhibits 10.45 through 10.47 were filed as Exhibits 1 through 3,
respectively, to the Form 8-K filed as of June 24, 1994, and are
hereby incorporated by reference.
10.48 Definitive acquisition Agreement providing for the combination of
the DEA metrology business of Finmeccanica (the "DEA Group") with the
Brown & Sharpe Measuring Systems Division dated as of June 10, 1994
between Brown & Sharpe Manufacturing Company and Finmeccanica S.p.A.,
was filed as Exhibit 1 to Form 8-K dated June 24, 1994, and is hereby
incorporated by reference.
10.49 Amendment No. 1 dated July 31, 1994, to Acquisition Agreement,
amending certain debt provisions of the agreement was filed as Exhibit
10.1.1 to Form 10-Q/A for the quarter ended July 2, 1994 and is hereby
incorporated by reference.
10.50 Letter Agreement of Henry D. Sharpe, Jr. dated September 28, 1994
entered into pursuant to the DEA Acquisition Agreement (was filed as
Exhibit No. 3 to Report on Form 8-K as of September 28, 1994), filed
October 13, 1994 is hereby incorporated by reference.
*10.51 Amendment No. 6, dated November 10, 1994, to Brown & Sharpe Savings
and Retirement Plan for Management Employees.
*10.52 Amendment No. 6, dated November 10, 1994, to Brown & Sharpe Savings
and Retirement Plan.
*10.53 Amended Profit Incentive Plan, as amended through February 14, 1994.
*11. Computation of Per Share Data for the Three Years Ended December 31,
1994.
18. Letter of Coopers & Lybrand, independent accountants, regarding
preferability of change in accounting principles to conform worldwide
use of percent-of-completion basis accounting for long-term large
machinery construction contracts of the European operations, filed as
Exhibit 18 to Form 10-Q for the quarter ended April 2, 1994, and is
hereby incorporated by reference.
*22. Subsidiaries of the Registrant.
*24. Consent of Independent Accountants
* These current year Exhibits are located in Exhibit number sequence
beneath the attached blue paper.
+ This identifies management contracts or compensatory plans.
Page 50
<PAGE>
Shareholders may obtain the following Exhibits filed with the 1994 Annual
Report on Form 10-K upon request. Charges will be made according to the
following schedule and payment should be made by either check or money order
and should accompany the request. The charge for all 1994 Exhibits is $4.67.
Charges for previously filed Exhibits incorporated by reference will be
provided upon request. Requests should be directed to: Secretary, Brown &
Sharpe Manufacturing Company, P.O. Box 456, Precision Park, North Kingstown,
Rhode Island 02852.
<TABLE>
<CAPTION>
Exhibit Pages Postage Total
-------------- ----- ------- -----
<S> <C> <C> <C> <C>
10.51 Amendment No. 6 to Brown & Sharpe Savings
and Retirement Plan for Management Employees. 1 $.32 $ .57
10.52 Amendment No. 6 to Brown & Sharpe Savings
and Retirement Plan. 1 $.32 $ .57
10.53 Amended Profit Incentive Plan 5 $.32 $1.57
11. Computation of Per Share Earnings for the
Three Years Ended December 31, 1994 1 $.32 $ .57
22. Subsidiaries of the Registrant 2 $.32 $ .82
24. Consent of Independent Accountants 1 $.32 $ .57
</TABLE>
Page 51
<PAGE>
EXHIBIT 10.51
Amendment No. 6
of the
Brown & Sharpe Savings and Retirement Plan
for Management Employees
------------------------
Pursuant to Section 12.1 of the Brown & Sharpe Savings and Retirement
Plan for Management Employees (the "Plan"), Brown & Sharpe Manufacturing
Company (the "Company") hereby amends the Plan, effective immediately, to add
a new Section 13.10 to read in its entirety as follows:
"13.10. Distributions upon certain dispositions. Reference is made to
---------------------------------------
the disposition by the Company to the Ruthman Pump & Engineering Company
("Ruthman") of substantially all of the assets used by the Company in its
pump division in 1992. A former Participant affected by such disposition
who continues employment with Ruthman may elect to receive a distribution
of his or her Share of the Trust in a single sum payment in accordance
with the otherwise applicable provisions of Articles 10 and 11; provided,
--------
that an election under this Section must be made prior to January 1,
1995; and provided further, that in the case of a former Participant
----------------
described in this Section who does not elect a distribution by December
31, 1994, no distribution shall be made until such former Participant
separates from the service of Ruthman or upon Retirement, death,
termination of employment on account of Total and Permanent Disability or
attainment of age 59-1/2."
IN WITNESS WHEREOF, Brown & Sharpe Manufacturing Company has caused this
instrument of amendment to be executed by its duly authorized officer this
10th day of November, 1994.
BROWN & SHARPE MANUFACTURING COMPANY
By: /s/ Charles A Junkunc
------------------------------
<PAGE>
EXHIBIT 10.52
Amendment No. 6
of the
Brown & Sharpe Savings and Retirement Plan
Pursuant to Section 12.1 of the Brown & Sharpe Savings and Retirement
Plan (the "Plan"), Brown & Sharpe Manufacturing Company (the "Company") hereby
amends the Plan, effective immediately, to add a new Section 13.10 to read in
its entirety as follows:
"13.10. Distributions upon certain dispositions. Reference is made to
---------------------------------------
the disposition by the Company to the Ruthman Pump & Engineering Company
("Ruthman") of substantially all of the assets used by the Company in its
pump division in 1992. A former Participant affected by such disposition
who continues employment with Ruthman may elect to receive a distribution
of his or her Share of the Trust in a single sum payment in accordance
with the otherwise applicable provisions of Articles 10 and 11; provided,
--------
that an election under this Section must be made prior to January 1,
1995; and provided further, that in the case of a former Participant
----------------
described in this Section who does not elect a distribution by December
31, 1994, no distribution shall be made until such former Participant
separates from the service of Ruthman or upon Retirement, death,
termination of employment on account of Total and Permanent Disability or
attainment of age 59 1/2."
IN WITNESS WHEREOF, Brown & Sharpe Manufacturing Company has caused this
instrument of amendment to be executed by its duly authorized officer this
10th day of November, 1994.
BROWN & SHARPE MANUFACTURING COMPANY
By: /s/ Charles A Junkunc
------------------------------
<PAGE>
EXHIBIT 10.53
BROWN & SHARPE MANUFACTURING COMPANY PAGE 1 OF 5
--------------------------------------------------------------------------
TYPE: PROCEDURE
SUBJECT: Profit Incentive Plan
KEYWORD: PIP
AUTHORIZED BY: F. Stuber
REVISED: February 14, 1994
--------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1. PURPOSE
-------
The objective is to reward Management employees with cash bonuses for the
achievement of corporate, participating unit and personnel objectives.
Total bonus is the sum of individual factors. Actual pay-out depends on
the degree of achieving AOP objectives. Participants in this Plan may
not participate in any other incentive compensation plan, such as sales
incentive compensation plans and other productivity incentive plans.
2. PROCEDURE
---------
2.1 Establish upcoming Plan.
2.1.1 Determine participating units (PU), responsibility for
administration and classes of Participants. Pres. Dec.
2.1.2 The total bonus (TB) is the sum of amounts earned for performance
against a number of selected factors. Annually determine the number and
relative weight of these factors
(WOF) in percent of TB for each class of Participant. Pres. Dec.
2.1.3 Name Participants and their planned bonus (PB), stated in percentage
of their January 1 Plan Year base salary for achieving AOP objectives
as planned. No such planned bonus percentage shall exceed 60% of a
-----------
Participant's base salary. The actual bonus paid may be below or
above the amount planned if objectives are under- or overachieved and
may not exceed 200% of the planned bonus. PU Mgrs. Dec.
2.1.4 Determine multiplier factors (M) for each factor, for different
levels of achievement relative to objective and plot
graphs of same. Pres. Dec.
2.1.5 Determine individual objectives for each Participant. PU Mgrs. Jan.
2.1.6 Divisions budget in their AOP total PU pay-out for their
participants assuming objectives are achieved 100% as
budgeted in AOP. PU Mgrs. Jan.
Budget 10% of total planned pay-out for President's Pool. CFO Jan.
2.1.7 Review overall Plan. MEC Feb.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
2.1.8 Approve Plan. Salary Feb.
Committee
2.1.9 Notify Participants of their statuses under the upcoming
Plan in writing. PU Mgrs. Feb.
2.2 Establishing bonuses after close of year.
Upon receipt of audited results for the previous year:
2.2.1 Establish degree of achievement of corporate and PU
objectives. CFO Feb. 10
2.2.2 Determine degree of achievement of Participants'
individual objectives. PU Mgrs. Feb. 10
2.2.3 Determine effective total bonuses for each Participant. CFO Feb. 15
2.2.4 Review planned bonuses. MEC Feb. 20
2.2.5 Approve planned bonuses. Salary Feb.
Committee
2.2.6 Notify Participants of their bonuses. PU Mgrs. Feb.
2.3 Overall planning and administration. CFO
3. FACTOR DEFINITION
-----------------
3.1 Corporate NI is the Net Income After Tax "as published" and approved at
the February Board of Directors' meeting.
3.2 PU EBT is the division's (or site's, as appropriate) AOP FIFO
earnings/loss before tax (after interest allocation).
3.3 PU Operating Cash Flow is the sum of each of the four quarters cumulative
cash flows per the AOP.
3.4 Individual Objectives are discretionary and determined by the
Participants' responsible supervisor. They may be based on objective,
measurable factors or be totally subjective.
3.5 Corporate Cash Flow is the sum of each of the four quarters cumulative B
& S AOP consolidated cash flows adjusted to exclude new long-term
financing sources.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
3.6 Factors 2 and 3 PU, Operating Income and Cash Flow, may be reduced up to
50% (maximum) at the discretion of the Division GM for Plan Participants at
major "non-division headquarters" sites (e.g., Leitz-MSD, US-PMI) and replaced
by an equivalent percentage based on the AOP operating income and cash flow
objectives for those sites. The "PU/Site" reduction is available to all
Division PIP Participants except the Division GM and Controller and other
staff with division wide-functional responsibilities. Prior clearance with
the CFO regarding Participants and objectives amounts is required.
4. MISCELLANEOUS
-------------
4.1 Salary Committee
The Salary Committee annually approves the Plan and approves rules and
regulations for the administration of the Plan. The decisions of the
Salary Committee upon any such question will be final and binding on all
persons.
The Salary Committee may amend the Plan at any time and in any respect
and may direct that the Plan may be suspended for any year prior to the
approval (Feb.) of that year's Plan provided, however, that the Salary
Committee may not, without the approval of the holders of the majority of
the common stock of the Company outstanding and entitled to vote,
increase the maximum bonus under the Regular Bonus Program above 60% of
the base salary of the Participant.
4.2 President's Pool for Special Adjustments
There shall be established a special fund amounting to a maximum of 10%
of the "planned" incentive plan pay-out for that year. The President, in
his sole discretion, may pay out some or all of this fund to Plan
Participant members or others. There shall be a separate procedure
governing the President's Pool. This special adjustment pool shall
replace the historical President's Award Plan.
4.3 Participants
Management employees annually designated by the Salary Committee as
Regular Bonus Program Participants.
4.4 Pay-out Percentage
4.4.1 Pay-out for achieving each factor according to the AOP will result in a
100% pay-out for the planned bonus for that factor.
4.4.2 Pay-out for all factors will be between 0% and 200% of the planned
percentage bonus for that factor.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
4.4.3 The actual pay-out for all factors except Factor 5 will be based on the
mathematical formula for the multiplier factors (M) underlying the factor
performance graphs. Factor 5, Individual Objectives, actual pay-out will be
determined by each Participant's responsible supervisor consistent with the
objectives established at the beginning of the year. However, the Factor 5
pay-out factor distribution for the Company must approximate "normal" or
"bell" curve whereby two thirds of Participants receive between a 70% and 130%
Factor 5 pay-out.
4.4.4 At the end of the year, the CFO shall have responsibility and authority
to certify the actuals for all factors, excluding Factor 4, "Individual
Objectives." Adjustments to PU factors may be made in cases where
corporate directed adjustments to PU earnings or cash flow have been
made.
4.4.5 The pay-out shall not be deemed "earned" until the end of the fiscal
year, at which time it shall be fully earned, payment of which shall be
subject to conditions described in Paragraph 4.5.
4.5 Termination of Employment
A Participant whose employment is terminated for cause or who voluntarily
terminates his or her employment (other than by retirement as provided in
the following paragraph) shall not receive payment of any benefits under
the Plan for the year in which his or her employment terminates. A
Participant who is separated for other reasons or who retires in
accordance with the provisions of any retirement plan or policy
maintained by Brown & Sharpe Manufacturing Company (the "Company") or any
subsidiary (including early retirement and Profit Incentive Plan
retirement for disability) or who dies, will be entitled to a partial
bonus calculated as the product of the fraction of the year during which
he or she was an employee and the full bonus he would have earned if the
Participant had remained for the full year.
4.6 No Right to Continue in the Company.
Neither the adoption nor the continuation of the Plan shall give any
employee or Participant the right to continue in the employ of the
Company or a subsidiary or the right to receive any award under the Plan
until such award is actually made as provided herein.
4.7 This policy does not supersede any agreements regarding PIP commitments
under the plans of previous years.
4.8 Effective Date.
The original Plan was effective July 1, 1969.
This Plan has been amended by the Directors and approved on February 14,
1994.
</TABLE>
Appendix: PIP 1994
-------------------
<PAGE>
APPENDIX
--------
P I P 1994
----------
<TABLE>
<C> <S> <C>
1. Participating Units and Responsibility for Administration
Corporate (including President, CFO and Division Managers) President
Measuring Systems (MS) R. F. Paolino
Precision Measuring Instruments (PMI) A. Aparicio
Custom Metrology (CM) J. Cooke
Technicomp C. A. Junkunc
</TABLE>
2. Weight of Factors (WOF) by Class of Participant
<TABLE>
<CAPTION>
CEO CFO P-1 P-2 P-3
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Factor 1 : Corporate NI 30% 30% 15% 10% 10%
Factor 2 : PU EBT -- -- 25% 25% 25%
Factor 3 : Corporate Cash Flow 30% 30% 15% 10% 10%
Factor 4 : PU Operating Cash Flow -- -- 25% 25% 25%
Factor 5 : Individual Objectives 20% 20% 20% 30% 30%
Factor 6 : Discretion of Salary Committee 20% 20% -- -- --
</TABLE>
3. Participants Planned Bonus (PB) for Achieving AOP Objectives (in percent
of base salary)
40% President & CEO (P level)
30% CFO and P-1 level (after initial year)
20% P-1 level (first year) and selected P-2 level participants
15% P-2 level participants not selected above
10% P-3 level participants
4. Maximum Total Pay-out
The maximum total pay-outs in percent of January 1 Plan Year base salary
are limited as follows:
CEO 60%
CFO, Div. Mgrs. 60%
P-1 40%
P-2 30%
P-3 20%
<PAGE>
EXHIBIT 11
BROWN & SHARPE MANUFACTURING COMPANY
------------------------------------
STATEMENT REGARDING COMPUTATION OF PER SHARE DATA*
-------------------------------------------------
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Dec. 31, Dec. 25, Dec. 26,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Computation of income (loss):
Net income (loss) used for
computation of primary
earnings (loss) per share $ (14,335) $ (2,244) $ (8,507)
Add: interest, net of taxes,
assuming conversion
of debentures 962 1,240 1,631
---------- ---------- ----------
Net income (loss) used for computation
of fully diluted earnings (loss) per share $ (13,373) $ (1,004) $ (6,876)
---------- ---------- ----------
Computation of shares:
Weighted average number of
common shares outstanding
during the year 6,057,090 4,969,453 4,898,536
Dilutive stock options - -- --
---------- ---------- ----------
Weighted average number of
common shares outstanding
used in computation of primary
earnings (loss) per share 6,057,090 4,969,453 4,898,536
Assumed conversion of 9-1/4%
convertible debentures 571,429 609,523 647,619
---------- ---------- ----------
Weighted average number of
common shares used in
computation of fully diluted
earnings (loss) per share 6,628,519 5,578,976 5,546,155
---------- ---------- ----------
Per common share:
Primary earnings (loss) $ (2.37) $ (.45) $ (1.74)
Fully diluted earnings (loss)* $ (2.02) $ (.18) $ (1.24)
</TABLE>
* Computed in accordance with item 601(11) of Regulation S-K.
<PAGE>
EXHIBIT 22
BROWN & SHARPE MANUFACTURING COMPANY
------------------------------------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Subsidiaries of the Registrant as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Percentage of
Jurisdiction Voting Power
of Owned by the
Name of Subsidiary Incorporation Registrant
----------------------------------------- ------------- --------------
<S> <C> <C>
Borel & Dunner, Inc. Michigan 100%
Technicomp Inc. Delaware 100%
Digital Equipment Automation Company Michigan 100%
Ets. Pierre Roch, S.A. France 100%
Mauser Prazisions Messmittel GmbH Germany 100%
DEA S.p.A. ** and its subsidiaries: Italy 100%
DEA Iberica S.A. Spain 100%
DEA GmbH Germany 100%
DEA France S.A. France 100%
DEA KK Japan 100%
Brown & Sharpe International Capital
Corporation and its subsidiaries: Delaware 100%
Brown & Sharpe A.G. Switzerland 100%
Leitz Messtechnik G.m.b.H. and its Germany 100%
subsidiary: Tesa Leitz G.m.b.H. Germany 100%
Tesa, S.A. and its subsidiaries: Switzerland 100%
Etalon, S.A. and its subsidiaries: Switzerland 100%
P. Roch, S.a.R.L. Switzerland 100%
Interapid, S.A. Switzerland 100%
Tesa France, S.A. France 100%
Tesa Italia, S.R.L. Italy 100%
Tesa Seimitsu KK Japan 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Jurisdiction Voting Power
of Owned by the
Name of Subsidiary Incorporation Registrant
------------------------------------------------------ -------------- --------------
<S> <C> <C>
Brown & Sharpe Group Ltd.* and its subsidiaries: United Kingdom 100%
White Lodge Financial Limited United Kingdom 100%
Tesa Metrology Systems Ltd. United Kingdom 100%
Thomas Mercer Ltd. United Kingdom 100%
</TABLE>
* Owned 71.3% by Brown & Sharpe International Capital Corporation and 28.7%
by Tesa, S.A.
** Owned 85.0% by Brown & Sharpe Manufacturing Company and 15.0% by Brown &
Sharpe International Capital Corporation.
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Brown & Sharpe Manufacturing Company on Form S-8 (File Nos. 2-33676, 2-56821,
2-60398, 2-77219, 2-77575, 2-83637, 2-97935, 33-17831, 33-23601, 33-23603, 33-
30927, and 33-54496) of our report dated March 29,1995, on our audits of the
consolidated financial statements and financial statement schedules of Brown &
Sharpe Manufacturing Company as of December 31, 1994 and December 25, 1993,
and for each of the three years in the period ended December 31, 1994, which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 29, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-26-1993
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 6,676
<SECURITIES> 0
<RECEIVABLES> 108,234
<ALLOWANCES> 0
<INVENTORY> 88,639
<CURRENT-ASSETS> 211,530
<PP&E> 125,565
<DEPRECIATION> 80,210
<TOTAL-ASSETS> 272,274
<CURRENT-LIABILITIES> 108,647
<BONDS> 14,000
<COMMON> 8,657
0
0
<OTHER-SE> 70,268
<TOTAL-LIABILITY-AND-EQUITY> 272,274
<SALES> 205,000
<TOTAL-REVENUES> 205,000
<CGS> 142,776
<TOTAL-COSTS> 142,776
<OTHER-EXPENSES> 67,584
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,575
<INCOME-PRETAX> (11,935)
<INCOME-TAX> 2,400
<INCOME-CONTINUING> (14,335)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,335)
<EPS-PRIMARY> (2.37)
<EPS-DILUTED> (2.37)
</TABLE>
