UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission file number 1-996
OR
( ) TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
GENERAL SIGNAL CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0445660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
High Ridge Park,
Box 10010, Stamford, Connecticut 06904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (203) 329-4100
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
X
(Yes) (No)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $1.00 47,299,987
(Class) (Outstanding at May 5, 1995)
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Statement of Earnings
(In millions, except per share data)
(Unaudited)
Three Months Ended March 31,
1995 1994
Net sales $ 411.0 $ 342.4
Cost of sales 293.3 243.0
Selling, general and administrative expenses 71.6 62.3
Total operating costs and expenses 364.9 305.3
Operating earnings 46.1 37.1
Interest expense, net 4.1 2.8
Earnings from continuing operations
before income taxes 42.0 34.3
Income taxes 14.7 12.1
Earnings from continuting operations 27.3 22.2
Discontinued operations:
Operating earnings - - 2.4
Net earnings $ 27.3 $ 24.6
Earnings per share of common stock:
Continuing operations $ 0.58 $ 0.47
Discontinued operations - - 0.05
Net earnings $ 0.58 $ 0.52
Dividends declared per common share $ 0.24 $ .225
Average common shares outstanding 47.2 47.4
See accompanying notes to financial statements.<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Balance Sheet
(In millions)
(Unaudited)
March 31, December 31,
Assets 1995 1994
Current assets:
Cash and cash equivalents $ 5.0 $ 0.3
Accounts receivable 259.7 258.3
Inventories 217.2 213.3
Prepaid expenses and other
current assets 46.7 44.5
Assets held for sale at estimated
realizable value 160.0 153.6
Deferred income taxes 44.1 47.2
Total current assets 732.7 717.2
Property, plant, and equipment 279.9 280.5
Intangibles 187.8 194.3
Other assets 144.3 134.5
Deferred income taxes 17.9 16.1
$1,362.6 $1,342.6
See accompanying notes to financial statements.
<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Balance Sheet-Continued
(In millions)
(Unaudited)
March 31, December 31,
Liabilities and Shareholders' Equity 1995 1994
Current liabilities:
Short-term borrowings and
current maturities of long-term
debt $ 3.9 $ 2.2
Accounts payable 136.6 152.9
Accrued expenses 151.7 183.1
Income taxes 26.9 18.9
Total current liabilities 319.1 357.1
Long-term debt, less current
maturities 308.1 269.1
Accrued postretirement and
postemployment obligations 156.7 161.2
Other liabilities 12.2 7.3
Total long-term liabilities 477.0 437.6
Shareholders' equity:
Common stock, authorized 150.0
shares; issued 63.9 shares
at March 31, 1995 and 63.7
shares at December 31, 1994 77.5 77.4
Additional paid-in capital 285.7 281.1
Retained earnings 636.4 620.5
Cumulative translation adjustments (10.8) (12.1)
Common stock in treasury, at cost;
16.7 shares at March 31,
1995 and 16.6 shares at
December 31, 1994 (422.3) (419.0)
Total shareholders' equity 566.5 547.9
$1,362.6 $1,342.6
See accompanying notes to financial statements.<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Condensed Statement of Cash Flows
(In millions)
(Unaudited)
Three Months Ended
March 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations $ 27.3 $ 22.2
Adjustments to reconcile earnings
to net cash from operating
activities:
Deferred taxes 2.9 0.5
Discontinued operations - - 2.4
Depreciation and amortization 13.8 14.0
Pension credits (2.2) (3.0)
Other, net 6.6 (0.7)
Changes in working capital (52.9) (26.1)
Net cash from operating activities (4.5) 9.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Divestitures 2.7 15.4
Acquisitions - - (9.2)
Capital expenditures (11.8) (17.2)
Other, net (5.8) (4.3)
Net cash from investing activities (14.9) (15.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short and long-term
borrowings 40.7 20.2
Dividends paid (11.3) (10.7)
Issuance of common stock 0.6 2.5
Shares repurchased (5.9) - -
Net cash from financing activities 24.1 12.0
Effect of exchange rate changes
on cash - - - -
Net change in cash and cash
equivalents 4.7 6.0
Cash and cash equivalents at
beginning of period 0.3 1.3
Cash and cash equivalents at end
of period $ 5.0 $ 7.3
See accompanying notes to financial statements.<PAGE>
GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Financial Statements
(Unaudited)
(In millions, except per share data)
1. The accompanying unaudited financial statements reflect all
adjustments (consisting of normal, recurring items) necessary
for the fair presentation of results for these interim
periods. These results are based upon generally accepted
accounting principles consistently applied with those used in
the preparation of the company's 1994 Annual Report on Form
10-K.
2. Inventories
March 31, December 31,
1995 1994
Finished goods $ 61.6 $ 62.1
Work in process 78.1 68.0
Raw material and purchased parts 100.8 106.4
Total FIFO cost 240.5 236.5
Excess of FIFO cost over LIFO
inventory value (23.3) (23.2)
Net carrying value $ 217.2 $ 213.3
3. Business Segment Information Three Months Ended March 31,
1995 1994
Net sales:
Process Controls $ 175.6 $ 141.7
Electrical Controls 160.1 134.5
Industrial Technology 75.3 66.2
$ 411.0 $ 342.4
Operating earnings:
Process Controls $ 22.1 $ 18.1
Electrical Controls 12.5 9.6
Industrial Technology 14.9 11.5
Total operating earnings before
unallocated expenses, equity
income and interest 49.5 39.2
Equity income - - 0.7
Net interest expense (4.1) (2.8)
Unallocated expenses (3.4) (2.8)
Earnings before income taxes $ 42.0 $ 34.3
<PAGE>
4. Property, Plant and Equipment March 31, December 31,
1995 1994
Property, plant and equipment,
at cost $ 618.4 $ 611.8
Accumulated depreciation and
amortization (338.5) (331.3)
Property, plant and equipment,
net $ 279.9 $ 280.5
5. Supplemental Information-Statement of Cash Flows
Three Months Ended
March 31,
1995 1994
Cash paid (received) for:
Interest $ 3.4 $ 1.4
Income taxes $ 2.1 $ (0.9)
Liabilities assumed in conjunction
with acquisitions:
Fair value of assets acquired $ - - $ 7.8
Cash paid - - (7.8)
$ - - $ - -
6. Repurchase of Shares
In March 1994, a two year program to repurchase up to 3.4 percent
or 1.6 million shares of the company's outstanding stock at that
time was approved by the Board of Directors. These shares will be
purchased systematically in open market transactions, and will be
used to offset dilution from the expected exercise of employee
stock options arising from the company's executive stock ownership
program. To date, approximately 774 thousand shares have been
repurchased under the program.
<PAGE>
7. Subsequent Acquisitions
On May 8, 1995, the company and Data Switch Corporation agreed to
merge. Subject to government and Data Switch shareholder approval,
the merger is expected to be completed during the fourth quarter of
1995. The agreement calls for General Signal to issue 1.5 million
shares of common stock in exchange for all of the outstanding
shares of Data Switch. The company intends to account for the
merger as a pooling of interests.
Data Switch designs, manufactures, markets and services a range of
products for large scale, high speed data networks. Data Switch is
the number two supplier, behind IBM, of switches which connect
mainframe computer systems with local or remote peripherals such as
printers, magnetic tape drives, and disk drives.
On May 10, 1995, the company agreed to acquire Best Power
Technology for approximately $200 million of cash. Subject to
government approval, the merger is expected to be completed before
September 30, 1995. The acquisition will be accounted for as a
purchase.
Best Power is a leading manufacturer of uninterruptible power
supply products, which provide backup power and protect computers,
information networks, and other critical systems from power line
disturbances. <PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations - First Quarter 1995 Compared With First Quarter 1994
First Quarter
1995 1994 Change
Net sales $411.0 $342.4 20.0%
Sales improved 20 percent over 1994 levels, of which 8 percent related to
acquisitions and the remainder reflected improved order activity. International
sales in 1995 totalled 21 percent of the company's net sales. Export sales
increased 48.5 percent, reflecting the acquisition of Fairbanks-Morse Pump
Corporation in late 1994 and several large orders in Process and Electrical
Controls. Offsetting the rise in export sales was a decline in foreign sales,
mostly in Process Controls' German-based industrial mixer business.
Overall, Process Controls sector sales increased 23.9 percent from increased
shipments of pumps, valves, industrial mixers and laboratory equipment, despite
minor declines in foreign sales of industrial mixers. The increased pump sales
resulted primarily from the acquisition of Fairbanks-Morse. In addition, the
sector benefitted from increased shipments of crystal growing furnaces,
primarily from stronger demand for the product in far east Asia.
Sales in the Electrical Controls sector increased 19.0 percent. The increase
was led by stronger demand for building and life safety products and broadcast
equipment, price increases in the distributor products line, and higher exports
of uninterruptible power supplies from Italy to other parts of Europe as a
result of the weakening of the Italian lira relative to other European
currencies.
The Industrial Technology sector sales increased 13.7 percent, mostly due to
strong demand for OEM automotive components. In addition, higher shipments of
farebox upgrades and token vending machines boosted Industrial Technology
sales.
First Quarter
1995 1994 Change
Gross profit $117.7 $99.4 18.4%
Percentage of net sales 28.6% 29.0%
Gross margins were flat reflecting more low margin project orders in Process
Controls, as well as higher shipments of lower margin jobs in backlog. Gross
profits in 1994 included $0.5 million of LIFO reserve liquidations.<PAGE>
First Quarter
1995 1994 Change
Selling, general and
administrative expenses $71.6 $62.3 14.9%
Percentage of net sales 17.4% 18.2%
Selling, general and administrative expenses improved as a percent of sales in
1995 reflecting the company's continued cost management efforts. Included in
selling, general and administrative expenses were pension credits of $2.2
million in 1995 and $3.0 million in 1994.
First Quarter
1995 1994 Change
Operating earnings $46.1 $37.1 24.3%
Percentage of net sales 11.2% 10.8%
Earnings for the Process Controls sector were up 22.1 percent. The improved
results, which were led by pumps and mixers, came principally from productivity
improvements, reduced costs and the acquisition of Fairbanks-Morse.
Electrical Controls sector operating earnings were up 30.2 percent. This
improvement is attributable primarily to stronger sales activity during the
period and cost containment efforts, with the strongest earnings growth seen in
broadcast equipment, followed closely by uninterruptible power supplies.
The Industrial Technology sector operating earnings improved 29.6 percent during
1995. This sector's improvements were led by telecommunications and OEM
automotive products, offset by a sharp decline in transit equipment earnings
that resulted from the substantial completion of the U. S. Postal Service stamp
vending machine contract.
During 1995, non-recurring items (primarily cash settlements of royalty and
insured matters) increased earnings of Electrical Controls by $1.8 million and
Industrial Technology by $2.0 million, and reduced unallocated expenses by $1.9
million. During 1994, non-recurring items (primarily non-cash adjustments to
reserves) increased Industrial Technology earnings by $1.8 million.
First Quarter
1995 1994 Change
Net interest expense $4.1 $2.8 46.4%
Percentage of net sales 1.0% 0.8%
Net interest expense increased as a result of higher average debt levels and
borrowing rates during 1995 as compared to 1994.
Net earnings from continuing operations were $27.3 million or $0.58 per share
in 1995 compared to $22.2 million or $0.47 per share in 1994. The company's
effective tax rate was approximately 35.0 percent in both years. <PAGE>
Financial Condition - March 31, 1995 Compared to December 31, 1994
Operations used cash of $4.5 million, compared to $9.3 million of cash generated
in 1994, with the decline reflecting primarily payments of year-end payables and
accruals. Included in operating cash flows were expenditures of $12.3 million
for previously divested operations and restructuring of existing units, and $2.4
million for severance pay. These expenditures were charged against accruals.
Management anticipates that these expenditures will result in lower future costs
from higher productivity.
Proceeds from the disposition of a portion of the discontinued operations were
$2.7 million in 1995, with no impact on income during the quarter. The company
used $11.8 million for capital expenditures and $6.0 million for purchases of
marketable equity securities. Dividends paid totalled $11.3 million, common
shares repurchased amounted to $5.9 million, and additional amounts borrowed
during the quarter totalled $40.7 million.
Long-term debt-to-capitalization was 35.2 percent at March 31, 1995, a slight
increase from year-end reflecting the modestly increased borrowing levels for
payments of year-end accounts payable and accruals.
At December 31, 1994, the company had a $43.2 million valuation allowance
established against its gross deferred tax assets of approximately $228
million.
There were no significant changes to the deferred tax assets nor the valuation
allowance since year-end. The valuation allowance was based on management's
assessment that it was more likely than not that the net deferred tax assets
will be realized through future taxable earnings or alternative tax strategies.
In the event that the tax benefits relating to the valuation allowance are
subsequently realized, $6.6 million of such benefits would reduce goodwill.
The company is well-positioned to finance future working capital requirements
and capital expenditures through current earnings and significant available
credit facilities. The pending merger with Data Switch will be financed by
issuing 1.5 million additional shares of common stock, and the acquisition of
Best Power will be financed through additional long-term debt.
Other Matters
As a producer of capital goods and equipment, the results of the company's
businesses can vary with the relative strength of the economy. Demand for
products in the Process Controls sector follows the demand for durable goods
orders, and strength in heavy industrial and utility markets is key to the
success of the sector. The Electrical Controls sector depends upon several
markets, principally the construction and computer equipment industries. The
Industrial Technology sector depends on several markets, primarily automotive,
mass transportation, and telecommunications equipment. Mass transportation
depends upon continued federal and local government spending, and
telecommunications is dependent upon continued research and development and the
continued success of new products. While no one marketplace or industry has a
major impact on the company's operations or results, the inherent pace of
technological changes presents certain risks that the company monitors
carefully. Success within all of the company's businesses is dependent upon the
timely introduction and acceptance of new products. <PAGE>
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Registrant (the
"Meeting") was held on April 20, 1995.
(b) The Registrant solicited proxies for the Meeting pursuant
to Regulation 14; there was no solicitation in opposition
to management's nominees for directors as listed in the
Proxy Statement, and all such nominees were elected.
(c) In addition to the election of directors, the shareholders
ratified the appointment of auditors, and approved a new
Senior Executive Incentive Compensation Plan.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.16 General Signal Corporation Senior Executive
Incentive Compensation Plan as approved by the
shareholders on April 20, 1995.
12.0 Calculation of Ratios of Earnings to Fixed Charges.
(b) No reports were filed on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENERAL SIGNAL CORPORATION
/s/ Terry J. Mortimer
Terry J. Mortimer
Vice President and Controller
Chief Accounting Officer
DATE: May 10, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENERAL SIGNAL CORPORATION
Terry J. Mortimer
Vice President and Controller
Chief Accounting Officer
DATE: May 10, 1995<PAGE>
Calculation of Ratios of Earnings to Fixed Assets
General Signal Corporation
(Dollars in millions) Exhibit (12.0)
Quarter
Ended
March 31, Year Ended December 31,
<PAGE>
1995 1994 1993 1992 1991 1990<PAGE>
Earnings:
Earnings from continuing
operations before income
taxes & extraordny items 42.0 160.3 139.1 9.5 97.4 15.5
Add: fixed charges 6.3 20.2 22.6 35.3 39.3 46.4
- - - - -----------------------------------------------------------------------
48.3 180.5 161.7 44.8 136.7 61.9
Fixed charges:
Interest Expense (Gross) 4.7 14.4 18.0 28.6 31.8 37.2
One-third of rent expense 1.6 5.8 4.6 6.7 7.5 9.2
- - - - ------------------------------------------------------------------------
$ 6.3 $ 20.2 $ 22.6 $ 35.3 $ 39.3 $ 46.4
- - - - ------------------------------------------------------------------------
Ratio 7.67 8.94 7.15 1.27 3.48 1.33
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<NAME> GENERAL SIGNAL CORP.
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<PERIOD-END> MAR-31-1995
<CASH> 5000
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<RECEIVABLES> 274100
<ALLOWANCES> 14400
<INVENTORY> 217200
<CURRENT-ASSETS> 732700
<PP&E> 618400
<DEPRECIATION> 338500
<TOTAL-ASSETS> 1362600
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<BONDS> 308100
<COMMON> 77500
0
0
<OTHER-SE> 489000
<TOTAL-LIABILITY-AND-EQUITY> 1362600
<SALES> 411000
<TOTAL-REVENUES> 411000
<CGS> 293300
<TOTAL-COSTS> 364900
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 42000
<INCOME-TAX> 14700
<INCOME-CONTINUING> 27300
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GENERAL SIGNAL CORPORATION
SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN*
1. Purpose
The purpose of the General Signal Corporation Senior Executive Incentive
Compensation Plan (the "Plan") is to provide senior executives of General
Signal Corporation and its subsidiaries (the "Corporation") with incentive
compensation based upon the achievement
of established performance goals.
2. Administration
The Plan shall be administered by a committee of not less than three (3)
members appointed annually by the Board of Directors (the "Committee"). The
Committee, which may but need not be the Personnel and Compensation
Committee, shall be composed of members of the Board of Directors who are
"outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code (the "Code"), and who are not eligible to
participate or to receive any benefits pursuant to the Plan.
The Committee shall have full power to administer and interpret the Plan and
to establish rules for its administration. The Committee may designate
employees of the Corporation to act in its behalf to engage in daily
administration of the Plan. The Committee, in
making any determination under or referred to in the Plan shall be entitled
to rely onopinions, reports or statements of officers or employees of the
Corporation and other entities and of counsel, public accountants and other
professional expert persons.
3. Eligibility
Eligibility for the Plan shall be limited to the Chief Executive Officer of the
Corporation and any other individual employed by the Corporation at the end of
any Plan Year who appears in the Summary Compensation Table of the Corporation's
Proxy Statement to Shareholders for that Plan Year. Individuals eligible to
participate in the Plan are herein called "Participant(s)".
*Approved by shareholders on April 20, 1995<PAGE>
4. Awards
Each Participant shall be eligible to receive a share of an incentive
compensation pool; provided, however, that the Committee shall have full
discretion to reduce or eliminate the share for any Participant for any Plan
Year. The incentive compensation pool for any Plan Year shall equal 5% of
operating earnings of the Corporation for that Plan Year and
it shall be based on reported operating earnings in the Corporation's financial
statementsincluded in the Corporation's Annual Report to Shareholders. The
financial statements shall be prepared in accordance with generally accepted
accounting principles and shall be audited by the Corporation's external
auditors. For purposes of this Plan, reported operating earnings may be
adjusted to exclude or include items of an unusual, non-
recurring or extraordinary nature as shall be specifically defined by the
Committee prior to the end of the first quarter of the Plan Year. In the event
that the Committee pays out less than the amount of the incentive compensation
pool for any Plan Year, the amount which is not paid out may, at the
Committee's sole discretion, be added to the incentive
compensation pool that is available for any subsequent Plan Year or Years. Each
Participant shall be eligible to receive a maximum award of 30% of the incentive
compensation pool for the applicable Plan Year.
By the end of the first quarter of each Plan Year, the Committee shall approve
the amount of each Participant's share of the incentive compensation pool.
Following each Plan Year, the Committee shall certify the total amount of the
incentive compensation pool. In determining the amount to be paid to a
Participant, the Committee shall consider a number of performance factors based
on individual merit and on the level of achievement
of the earnings-per-share goal and the progress in carrying out the
Corporation's objectives and strategies. Awards under the Plan shall be paid
in cash as soon as practicable after the Plan Year, except to the extent
deferred pursuant to the General Signal Corporation Deferred Compensation
Plan.
5. Miscellaneous Provisions
Amendment of the Plan. The Board of Directors shall have the right to suspend
or terminate this Plan at any time and may amend or modify the Plan prior to
the beginning of any Plan Year.
Assignment or Transfer. No opportunity shall be assignable or transferable by a
Participant.
Costs and Expenses. The costs and expenses of administering the Plan shall be
borne by the Corporation and shall not be charged against any Participant.
Effect on Employment. Nothing contained in this Plan or any agreement related
hereto or referred to herein shall affect or be construed as affecting, the
terms of employment of any Participant except to the extent specifically
provided herein or therein. Nothing contained in this Plan or any agreement
related hereto or referred to herein shall impose, or be construed as imposing,
any obligation on (a) the Corporation to continue the
employment of any Participant and (b) any Participant to remain in the employ
of the Corporation.
Effective Date. Subject to shareholder approval, this Plan shall be effective
as of January 1, 1995.
Governing Law. The Plan shall be governed by the laws of the State of New York
and applicable federal laws.
Other Incentive Plans. The adoption of the Plan does not preclude the adoption
by appropriate means of any other incentive plan for employees.
Plan Year. "Plan Year" means the calendar year commencing January 1, 1995, and
each calendar year thereafter.
Taxation. The Corporation shall have the right to deduct from any award to be
paid under the Plan any federal, state or local taxes required by law to be
withheld with respect to such payment.
