<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5881
BROWN & SHARPE MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Delaware 050113140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Precision Park, 200 Frenchtown Road, North Kingstown, Rhode Island 02852
(Address of principal executive offices and zip code)
(401) 886-2000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __x__ No_____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date; 8,218,206 Class A common
shares, 520,219 Class B common shares, par value $1, outstanding as of June 30,
1996.
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS*
BROWN & SHARPE MANUFACTURING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended June 30, For the Six-Months Ended June 30,
------------------------------ ---------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 89,505 $ 80,868 $ 165,456 $ 154,859
Cost of sales 62,017 57,263 113,693 108,174
Selling, general and
administrative expense 22,685 20,358 44,447 43,090
Restructuring charges - 117 -- 247
---------- ---------- ---------- ----------
Operating profit 4,803 3,130 7,316 3,348
Interest expense 2,476 2,224 4,553 3,948
Other income (loss), net (65) 139 169 390
---------- ---------- ---------- ----------
Income (loss) before income taxes 2,262 1,045 2,932 (210)
Income tax provision 408 -- 528 200
---------- ---------- ---------- ----------
Net income (loss) $ 1,854 $ 1,045 $ 2,404 $ (410)
========== ========== ========== ==========
Primary and fully diluted
income (loss) per common share:
Net income (loss) per share $ .21 $ .12 $ .27 $ (.05)
======= ======== ======== =======
Weighted average shares
outstanding and common
stock equivalents
during the period 8,889,803 8,705,241 8,884,156 8,691,487
========== ========== ========== ==========
</TABLE>
* The accompanying notes are an integral part of the financial statements.
Page 2
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BROWN & SHARPE MANUFACTURING COMPANY
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,226 $ 6,262
Accounts receivable, net of allowances for
doubtful accounts of $3,175 and $3,030 114,251 113,579
Inventories 96,983 88,558
Deferred income taxes 3,996 3,322
Prepaid expenses and other current assets 5,313 5,436
----------- -----------
Total current assets 224,769 217,157
Property, plant and equipment:
Land 6,892 7,141
Buildings and improvements 42,214 37,447
Machinery and equipment 91,440 95,482
----------- -----------
140,546 140,070
Less-accumulated depreciation 86,946 87,183
----------- -----------
53,600 52,887
Goodwill, net 11,269 11,529
Other assets 13,014 13,827
----------- -----------
$ 302,652 $ 295,400
=========== ===========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable and current
installments of long-term debt $ 38,539 $ 45,229
Accounts payable 49,543 44,936
Accrued expenses and income taxes 38,842 39,423
----------- -----------
Total current liabilities 126,924 129,588
Long-term debt 67,973 56,839
Other long-term liabilities 5,749 6,310
Deferred income taxes 2,765 2,765
Unfunded accrued pension cost 5,703 5,823
Termination indemnities 8,668 8,218
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 8,241,798 shares in 1996
and 8,195,795 shares in 1995 8,242 8,196
Class B, par value $1; authorized 2,000,000 shares;
issued and outstanding 520,219 shares in 1996
and 522,575 shares in 1995 520 523
Additional paid in capital 67,248 66,863
Earnings employed in the business (5,628) (8,032)
Cumulative foreign currency translation adjustment 14,985 18,926
Treasury stock: 23,592 shares in 1996 and
in 1995 at cost (270) (270)
Unearned compensation (227) (349)
----------- -----------
Total shareowners' equity 84,870 85,857
----------- -----------
$ 302,652 $ 295,400
=========== ===========
</TABLE>
* The accompanying notes are an integral part of the financial statements.
Page 3
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six-Months Ended June 30,
------------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash Provided by (Used in) Operations:
Net income (loss) $ 2,404 $ (410)
Adjustment for Noncash Items:
Depreciation and amortization 3,962 4,094
Deferred income taxes -- --
Unfunded pension 218 208
Deferred compensation 122 108
Termination indemnities 159 46
Changes in Working Capital:
(Increase) Decrease in accounts receivable (4,908) 9,699
Increase in inventories (11,463) (4,431)
Increase in prepaid expenses and other current assets (486) (2,424)
Increase (decrease) in accounts payable and accrued expenses 5,207 (3,866)
---------- ----------
Net Cash (Used in) Provided by Operations (4,785) 3,024
---------- ----------
Investment Transactions:
Capital expenditures (5,425) (3,933)
Other investing activities 405 646
---------- ----------
Cash (Used in) Investment Transactions (5,069) (3,287)
---------- ----------
Financing Transactions:
Increase in short-term debt 4,444 6,200
Proceeds from issuance of long-term debt 2,963 --
Principal payments of long-term debt (1,593) (1,222)
Other financing activities 428 395
---------- ----------
Cash Provided by Financing Transactions 6,242 5,373
---------- ----------
Effect of Exchange Rate Changes on Cash 1,576 (5,215)
---------- ----------
Cash and Cash Equivalents:
Increase (decrease) during the period (2,036) (105)
Beginning balance 6,262 6,676
---------- ----------
Ending balance $ 4,226 $ 6,571
========== ==========
Supplementary Cash Flow Information:
Interest paid $ 4,158 $ 3,811
========= =========
Taxes paid $ 262 $ 1,633
========= =========
</TABLE>
* The accompanying notes are an integral part of the financial statements.
Page 4
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulations S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the quarter and half year period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Brown & Sharpe
Manufacturing Company's annual report on Form 10-K for the year ended
December 31, 1995.
2. 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. Cash also includes $0.7 million of cash pledged to
support bid bonds and performance bonds issued by a bank.
3. The composition of inventory is as follows:
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Parts, raw materials, and supplies $ 39,988 $ 39,857
Work in process 20,116 15,906
Finished goods 36,879 32,795
---------- ----------
$ 96,983 $ 88,558
========== ==========
</TABLE>
4. Income taxes include provisions for federal, foreign and state income taxes
and are based on the Company's estimate of effective income tax rates for
the full year. The current tax provision for the first half of 1996 and
1995 is $408 and $200, respectively.
5. Primary and fully diluted earnings per share for the quarter and half year
ended June 30, 1996 is based upon the weighted average number of common
shares outstanding and common stock equivalents. For the quarter and half
year ended June 30, 1995, earnings (loss) per share was based upon the
weighted average number of common shares outstanding since inclusion of
common stock equivalents would be antidilutive.
6. On April 7, 1995, the U.S. Court of Appeals for the District of Columbia
Circuit rendered a decision on the second appeal by the International
Association of Machinists and Aerospace Workers (the "IAM") of a
supplemental decision and order of the National Labor Relations Board
("NLRB") reaffirming an April 1986 decision of the NLRB dismissing
reinstated unfair labor practice charges brought against the Company by the
IAM in September 1982. These charges arose out of a strike which began at
the Company's Rhode Island operations in October 1981. Although the NLRB
has previously upheld dismissal of the reinstated unfair labor practices
charges, the Appeals Court in its latest decision has stated that the NLRB
failed to articulate and apply a judicially acceptable standard to
determine whether certain evidence offered and characterized by the Union
as being newly discovered was material and of such a nature to justify
tolling the statute of limitations so as to permit the filing of the
reinstated unfair labor practice charges. The Court vacated the judgment of
the NLRB favorable to the Company and has remanded the case back to the
NLRB for further proceedings to determine these evidentiary issues and
their effect on the application of the statute of limitations to the
reinstated unfair labor practice charges. The Court has directed that
should the NLRB rule against the Company on the evidentiary issues
presented for consideration then it must proceed to determine the merits of
Page 5
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the reinstated unfair labor practice charges. Management of the Company and
its counsel believe the NLRB is not likely to rule that the case must go
forward on its merits and that a finding of liability against the Company
in this matter continues to be remote.
Page 6
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales of Brown & Sharpe
represented by the components of income and expense for the quarters and half
years ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Quarters Ended June 30 Half-Years Ended June 30
---------------------- ------------------------
1996 1995 1996 1995
----- ----- ------ -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 69.3 70.8 68.7 69.8
Selling, general and administrative expense 25.3 25.2 26.9 27.8
Restructuring charges - 0.1 - 0.2
----- ----- ------ -----
Operating profit 5.4 3.9 4.4 2.2
Interest expense 2.8 2.8 2.7 2.6
Other income (expense), net (0.1) 0.2 0.1 0.2
----- ----- ------ -----
Income (loss) before income taxes 2.5 1.3 1.8 (0.2)
Income tax provision 0.4 - 0.3 0.1
----- ----- ------ -----
Net income (loss) 2.1% 1.3% 1.5% (0.3)%
===== ===== ====== =====
</TABLE>
RESULTS OF OPERATIONS
(Quarter Ended June 30, 1996 compared to Quarter Ended June 30, 1995)
Orders and Backlog. Orders during the second quarter of 1996 totaled $91.1
million compared to $78.2 million for the second quarter of 1995. Foreign
currency fluctuations caused a $2.0 million decrease in second quarter 1996
orders compared to the second quarter of 1995. Excluding the effect of this
item, orders in the second quarter of 1996 increased $14.9 million or 19.1% from
the second quarter of 1995. Of the $14.9 million increase, Measuring Systems
Division ("MSD") experienced a $17.1 million increase, while the other divisions
incurred a $2.2 million decrease. The second quarter orders increased both in
the U.S. and Europe. Backlog at June 30, 1996 increased to $70.9 million
compared to $70.2 million at the end of the first quarter of 1996.
Net Sales. Net sales in the second quarter of 1996 were $89.5 million, compared
to $80.9 million in the second quarter of 1995. Foreign currency exchange rate
fluctuations caused a decrease in net sales in the second quarter of 1996 of
$3.1 million as compared to the second quarter of 1995. Excluding the effect of
this item, second quarter 1996 net sales increased approximately $11.7 million
or 14.5% from second quarter 1995 sales. $11.2 million of the $11.7 million
increase occurred in MSD and $0.5 million of the increase came from the
Precision Measuring Instruments Division ("PMI") and Custom Metrology Division
("CM"). Each of the MS Group's divisions experienced increased sales in 1996.
The increase was largely due to shipments to new customers, particularly of the
smaller machines manufactured in the U.S., as well as increased sales of more
fully configured machines with higher unit value than the prior period.
Gross Profit. Gross profit margin increased to 30.7% of sales in the second
quarter of 1996 from 29.2% in the second quarter of 1995. MSD's margins
increased in 1996 but were offset by a decrease in PMI and CM margins. The MS
Group's margins increased due to improved product mix, which was partially
caused by increased sales of more fully configured machines with higher sales
value. In addition, increased service business revenue contributed to the
improved margins. Partially offsetting those increases was PMI's decreased
profit margin. The PMI decrease resulted from a planned reduction of inventory
levels which resulted in reduced production levels, less fixed overhead cost
absorption, and lower margins in the second quarter.
Selling, General and Administrative Expense. Selling, general and administrative
expense in the second quarter of 1996 was $22.7 million or 25.3% of net sales,
representing an increase from $20.4 million or 25.2% of net sales in the
comparable period in 1995. Exclusive of foreign currency transaction
gains or losses, which amount to a $0.2 million loss in 1996 and $2.0 million
gain in 1995, SG&A decreased from 27.7% of sales in 1995 to 25.1% of sales in
1996. The decrease in SG&A as a percentage of net sales was primarily
attributable to the MS Group reducing travel, administrative, and advertising
expenses.
Operating Profit (Loss). Brown & Sharpe operating profit was $4.8 million in the
second quarter of 1996 compared to an operating profit of $3.1 million in the
second quarter of 1995. In the United States,
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<PAGE>
operations has an operating profit of $2.0 million for the second quarter of
1996 as compared with an operating loss of $1.1 million in the second quarter of
1995. Foreign operations had an operating profit of $2.8 million in the second
quarter of 1996 as compared with an operating profit of $4.2 million in the
second quarter of 1995. MSD operating profit was $4.3 million for 1996 and $1.6
million for 1995 compared with the other divisions' operating profit for 1996 of
$0.5 million and $1.5 million for 1995.
Interest Expense. Interest expense totaled $2.5 million in the second quarter of
1996 compared to $2.2 million in the second quarter of 1995. This increase
reflects a $8.8 million increase in the average balance of borrowings, including
foreign currency fluctuations of $2.7 million, along with higher average
interest rates in 1996.
Income Tax Expense. Income taxes include provisions for federal, foreign and
state income taxes and are based on the Company's estimate of the effective
Income tax rates for the full year. The 1996 effective tax rate amounted to
18.0% which compared with the effective tax rate of 26.6% for the year ended
December 31, 1995. The reduction in the effective tax rate in 1996 from the year
ended December 31, 1995 is attributable to income earned in tax jurisdictions in
which net operating loss carryforwards will be recognized in 1996.
Net Income (Loss). As a result of the preceding factors, the Company had net
income of $1.8 million ($.21 per share) in the second quarter of 1996 compared
to a net income of $1.1 million ($.12 per share) in the second quarter of 1995.
RESULTS OF OPERATIONS
(Half-Year Ended June 30, 1996 compared to Half-Year Ended June 30, 1995)
Orders and Backlog. Orders during the first half-year of 1996 totaled $176.0
million compared to $157.3 million for the first half-year of 1995. Foreign
currency fluctuations caused a $1.7 million decrease in first half 1996 orders
compared to the first half of 1995. Of the $20.4 million increase, MS Group
experienced a $24.8 million increase, while the other divisions incurred a $4.4
million decrease. Backlog at June 30, 1996 increased to $70.9 million compared
to $59.0 million at year-end 1995.
Net Sales. Net sales in the first half of 1996 increased 6.8% or $10.6 million
over the first half of 1995, rising to $165.5 million from $154.9 million.
Foreign currency exchange rate fluctuations caused a decrease in net sales of
$2.1 million in the first half of 1996 as compared to the first half of 1995.
Sales increased, excluding foreign currency effects, $12.7 million over the
first half of 1995. The MS Group was responsible for $9.3 million of the $12.7
million increase, and $3.4 million of the increase came from the PMI and CM
Divisions. Each of the MS Group's divisions experienced increased sales in the
first half of 1996. The increase was largely due to shipments to new customers,
particularly of the smaller machines manufactured in the U.S., as well as
increased sales of more fully configured machines with higher unit value than
the prior period. PMI Division sales increased due to increased volume in the
United States and also price increases.
Gross Profit. Gross profit margin increased 1.1 percentage points to 31.3% in
the first half of 1996 from 30.2% in the first half of 1995, over which period
the MS Group margins increased while the PMI Division's margins decreased. The
MS Group's margin increased due to improved product mix, in part resulting from
increased sales of more fully configured machines with higher sales value. In
addition, increased service business revenue contributed to the improved margin.
Partially offsetting those increases was the PMI Division's decreased profit
margin. The PMI Division decrease resulted from a planned reduction of inventory
levels which resulted in reduced production levels and consequently less fixed
overhead cost absorption and lower gross profit margins in the second quarter.
Selling, General and Administrative Expense. Selling, general and administrative
expense ("SG&A") as a percentage of net sales decreased to 26.9% in the first
half of 1996 from 27.8% in the first half of 1995. Exclusive of foreign currency
transaction gains or losses, which amounted to a $0.7 million loss in 1996 and a
$2.0 million gain in 1995, SG&A decreased as a percentage of net sales from
29.1% of sales in 1995 to 26.4% of sales in 1996. The decrease in SG&A as a
percentage of net sales was primarily attributable to the MS Group reducing
travel, administrative, and advertising expenses.
Operating Profit. Operating profit in the first half of 1996 increased 118.5% or
$4.0 million , over operating profit for the first half of 1995, rising from
$3.3 million to $7.3 million. The increase in operating profit for the first
half of 1996 was primarily attributable to a $4.2 million increase in operating
profit at the MS Group, offset in part by a $0.2 million decrease in operating
profit at the PMI and CM Divisions.
Interest Expense. Interest expense increased 17.9%, or $0.7 million, in the
first half of 1996 over interest expense in the first half of 1995, rising
from $3.9 million to $4.6 million. This increase reflects both a $7.1 million
increase in average borrowings over the comparable period in 1995, which
resulted from additional working capital requirements and financing for a new
facility in Telford, England and an increase in average interest rates due to an
increased level of borrowing in Italy and the United States where applicable
interest rates are higher than the Company average.
Income Tax Expense. Income taxes include provisions for federal, foreign and
state income taxes and are based on the Company's estimate of the effective
income tax rates for the full year. The estimated 1996 effective tax rate
amounted 18.0% which compared with the effective tax rate of 26.6% for the year
ended December 31, 1995. The reduction in the estimated effective tax rate in
1996 from the year ended December 31, 1995 is attributable to income earned in
tax jurisdictions in which net operating loss carryforwards will be recognized
in 1996.
Net Income (Loss). As a result of the preceding factors, the Company had net
income of $2.4 million ($.27 per share) in the first half of 1996 compared to a
net loss of $0.4 million ($.05 per share) in the first half of 1995.
Page 8
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LIQUIDITY AND CAPITAL RESOURCES
Over the last several years, the Company has funded its working capital, capital
expenditure, research and development and other cash needs from operating cash
flows, sales proceeds from discontinued businesses, borrowings under credit
facilities and an aggregate of $33.5 million of term and mortgage indebtedness
incurred in 1994. At June 30, 1996, the Company's outstanding indebtedness was
$106.5 million, including $74.6 million of long-term indebtedness (including
current portion) and $31.9 million of short-term borrowings (including $15.1
million outstanding pursuant to the Facility, a $25.0 million renewable,
secured, revolving credit facility provided by a domestic financial
institution), and the Company's cash and cash equivalents were $4.2 million
including restricted cash of $0.7 million. During the first half of 1996, the
Company refinanced $12.2 million outstanding Swiss mortgages which now mature
June, 2000 and June 2001. The Facility provides for maximum aggregate borrowings
of $25 million and the foreign credit facilities provide for maximum aggregate
borrowings of $47.4 million. The Facility is available for working capital and
general corporate purposes and $24.4 million of foreign credit facilities are
available for working capital and general corporate purposes in the countries in
which the loan was originated by the local subsidiary, $17.4 million of the
foreign credit facilities are available on presentment of eligible invoices for
discounting and $5.6 million of the foreign credit facilities are available to
support letters of credit and performance and bid bonds. Actual availability
under the Facility is limited on the basis of eligible United States accounts
receivable and inventory. At June 30, 1996, giving effect to such borrowing base
limitations and outstanding borrowings, the Company's maximum available
additional borrowings under the Facility were $6.8 million and its maximum
available additional borrowings under its foreign credit facilities were $30.6
million.
The commitments under the Facility continue until September 1997 and
automatically renew thereafter for one year periods, subject to the termination
provisions contained in the Facility. The Facility is secured by substantially
all of the Company's domestic assets and shares in some of its foreign
subsidiaries and contains a number of covenants, including the obligations to
maintain certain financial ratios and a prohibition on the payment of dividends.
The Company's foreign credit facilities are generally due on demand and certain
of such facilities are secured by certain of the Company's foreign assets. An
aggregate of $25 million of term indebtedness incurred by the Company in 1994
(and guaranteed by Finmeccanica) will mature in September 1997. On March 30,
1996 and June 30, 1996, the Company breached the current ratio covenant
contained in the Facility. Such breaches were waived. There can be no assurance
that the Company will not breach this covenant in the future.
The Company's growth during 1995 and the first six months of 1996 has increased
its working capital requirements. In order to fund such increased working
capital requirements, during the first half of 1996, the Company restricted
planned capital expenditures and funding for certain other projects planned to
achieve cost reductions and growth. If additional sources of financing are not
arranged by the Company, it is likely that the Company would need to continue
such restrictions in the future.
The Company is currently negotiating to replace the Facility with a $40.0
million secured revolving credit (the "New Facility"). Based on its current
discussion regarding the New Facility, the Company believes that the New
Facility will be secured by substantially all of its domestic assets and shares
in some of its foreign subsidiaries and that the borrowing base limitations
contained therein will be less restrictive than those contained in the Facility.
As of this date, a commitment letter has not been obtained. There can be no
assurance that the New Facility will be obtained on terms acceptable to the
Company, if at all.
Cash Flow. Net income of $2.4 million for the first half of 1996 increased
by depreciation and other non-cash items amounting to $4.5 million and offset by
increases in working capital amounting to $11.7 million resulted in operations
in the first half of 1996 using $4.8 million of cash. In the first half of 1995,
increased working capital of $1.0 million resulted in $3.0 million of cash being
provided by operations.
In the first half of 1996, investment transactions used cash of $5.1 million, of
which capital expenditures were $5.5 million, as compared with depreciation of
$3.0 million in the first half of 1996. This compares to investment transactions
using cash of $3.3 million in the first half of 1995, of which capital
expenditures amounted to $3.9 million and depreciation amounted to $4.1 million.
Cash provided from financial transactions was $6.2 million in the first half of
1996 compared with $5.3 million in the first half of 1995. 1996 financial
transactions consisted of a $4.4 million increase in short-term borrowings and
$3.0 million of long-term debt to finance the Telford facility described
below and the repayment of $1.6 million of long-term debt. 1995 financing
transactions included $6.2 million of short-term borrowings offset by $1.2
million of long-term debt payments.
Working Capital. Working capital was $97.8 million at the end of the first half
of 1996 compared to $87.6 million at the end of 1995. Inventories increased to
$97.0 million at June 30, 1996, an increase of $8.4 million from the end of
1995, and accounts receivable increased to $0.7 million from year end 1995.
Also, total short- and long-term borrowing increased $4.4 million to a total of
$106.5 million at June 30, 1995 as compared to $102.1 million outstanding at
December 31, 1995 primarily due to working capital requirements.
Capital Expenditures. The Company's capital expenditures, net of disposal
proceeds, were approximately $5.5 million in the first half of 1996, of which
$3.2 million was for the new facility in England, compared to $3.9 million in
the first half of 1995. Management estimates that capital expenditures for the
remainder of 1996 will amount to approximately $4.0 million, which includes
expenditures amounting to $0.8 million for completion of the new facility in
England which replaces an existing leased facility. Amounts spent on capital
expenditures have been less than planned and may increase in the future if the
Company has sufficient liquidity available.
For additional information on the refinancings planned by the Company and
liquidity, reference is made to the Management's Discussion and Analysis of
Financial Condition and Results of Operation in the Company's Report on Form 10K
for the year 1995.
PROSPECTIVE INFORMATION
This section includes certain forward-looking statements about the Company's
sales, expenditures and cost savings, operating and capital requirements and
refinancings. Any such statements are subject to risks that could cause the
actual results or needs to vary materially. These risks are discussed in "Risk
Factors" in the Company's Report on Form 10-K for the year 1995.
Page 9
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PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Stockholders was held on Thursday, May 2,
1996. The stockholders voted to (1) fix the number of directors at ten and to
elect nominees to the Board of Directors to serve for the ensuing term; and (2)
ratify and approve the appointment by the Board of Directors of Ernst & Young
L.L.P. as the Company's independent accountants for the year 1996.
The following is a summary of the results of matters submitted to security
holders:
(1) The following persons were elected to serve as directors for three year
terms expiring in 1999 and received the votes listed. There were no
abstentions or broker non-votes applicable to the election of directors:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Class A Common Stock
John M. Nelson 7,295,752 11,634
Vincenzo Cannatelli 7,283,112 14,274
Russell A. Boss 7,293,722 13,664
Class B Common Stock
John M. Nelson 4,087,868 26,306
Russell A. Boss 4,088,268 25,906
</TABLE>
The following directors have terms of office which continued after the
meeting: Enrico Albareto, Frank T. Curtin, Paul R. Tregurtha, Henry D.
Sharpe Jr., Henry D. Sharpe, III, Howard K. Fuguet, and Alberto de
Benedictis.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
<S> <C> <C> <C> <C>
(2) appointment of Ernst & Young L.L.P.
as the Company's independent accountants 11,376,276 15,326 19,958 0
</TABLE>
Page 10
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. See Exhibit Index annexed.
B. No Form 8-K was filed during the quarter ended June 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROWN & SHARPE MANUFACTURING COMPANY
By: /s/ Charles A. Junkunc
------------------------------------------
Charles A. Junkunc
Vice President and Chief Financial Officer
(Principal Financial Officer)
August 13, 1996
Page 11
<PAGE>
BROWN & SHARPE MANUFACTURING COMPANY
EXHIBIT INDEX
4. Indenture dated as of 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, originally filed as Exhibit (b) (1) to Form S-16 Registration
Statement No. 2-69203 dated October 1, 1980 and incorporated herein by
reference.
The Registrant hereby agrees to furnish a copy to the Commission of other
instruments defining the rights of holders of long-term debt, as to which
the securities thereunder do not exceed ten percent of total assets on a
consolidated basis.
11. Computation of Per Share Data for the half years ended June 30, 1996 and
1995.
Page 12
<PAGE>
EXHIBIT 11
BROWN & SHARPE MANUFACTURING COMPANY
COMPUTATION OF PER SHARE DATA
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended June 30 Half-Year Ended June 30
------------------------- -------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 8,738 8,703 8,738 8,691
Net effect of dilutive stock options
-- based on the treasury stock method
using average market price 151 2 146 --
------- ------- ------- -------
Totals 8,889 8,705 8,884 8,691
======= ======= ======= =======
Net income (loss) $ 1,854 $ 1,045 $ 2,404 $ (410)
======= ======= ======= =======
Per share amount $ .21 $ .12 $ .27 $ (.05)
======= ======= ======= =======
Fully diluted:
Average shares outstanding 8,738 8,703 8,738 8,691
Net effect of dilutive stock options
-- based on the treasury stock
method using average market
price which is greater than
quarter-end market price 151 2 -- --
Net effect of dilutive stock options
-- based on the treasury stock
method using year-to-date weighted
average shares which is greater
than the incremental shares
based on ending market price -- -- 152 --
Assumed conversion of 9 1/4%
convertible subordinated
debentures * * * *
------- ------- ------- -------
Totals 8,889 8,705 8,890 8,691
======= ======= ======= =======
Net income (loss) $ 1,854 $ 1,045 $ 2,404 $ (410)
Add 9 1/4% convertible
subordinated debenture
interest, net of federal
income tax effect * * * *
------- ------- ------- -------
Totals $ 1,854 $ 1,045 $ 2,404 $ (410)
======= ======= ======= =======
Per share amount $ .21 $ .12 $ .27 $ (.05)
======= ======= ======= =======
</TABLE>
* Conversion of the 9-1/4% convertible subordinated debentures is not assumed
in the computation because its effect is anti-dilutive.
Page 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,226
<SECURITIES> 0
<RECEIVABLES> 117,426
<ALLOWANCES> (3,175)
<INVENTORY> 96,983
<CURRENT-ASSETS> 224,769
<PP&E> 140,546
<DEPRECIATION> 86,946
<TOTAL-ASSETS> 302,652
<CURRENT-LIABILITIES> 126,924
<BONDS> 0
0
0
<COMMON> 8,762
<OTHER-SE> 76,108
<TOTAL-LIABILITY-AND-EQUITY> 302,652
<SALES> 165,456
<TOTAL-REVENUES> 165,456
<CGS> 113,693
<TOTAL-COSTS> 113,693
<OTHER-EXPENSES> 44,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,553
<INCOME-PRETAX> 2,932
<INCOME-TAX> 528
<INCOME-CONTINUING> 2,404
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,404
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
