UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL SIGNAL CORPORATION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report June 26, 1995
(Date of earliest event reported)
GENERAL SIGNAL CORPORATION
(exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation)
1-996 16-0445660
(Commission File Number) (IRS Employer
Identification Number)
P.O. Box 10010
HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904
(Address of principal executive offices)
(Zip Code)
(203) 329-4100
(Registrant's telephone number, including area code)<PAGE>
Item 2. Acquisition of Assets
On June 14, 1995, G.S. Newco, Inc.("G.S. Newco") a Delaware
corporation and wholly owned subsidiary of General Signal
Corporation ("GSX"), a New York corporation, accepted for payment
all tendered shares of Common Stock (the "Shares"), par value $.01
per share, of Best Power Technology, Incorporated ("Best"), a
Delaware corporation, pursuant to GSX's May 16, 1995 tender offer
of $21 per share (the "Offer"). As a result of purchasing all
Shares tendered in the Offer, G. S. Newco owned 9,325,055 Shares,
representing approximately 97% of the outstanding common stock of
Best. Pursuant to the Agreement and Plan of Merger, dated May 10,
1995, among GSX, G.S. Newco and Best, GSX caused G.S. Newco to
merge with and into Best (the "Merger"). Pursuant to Section 253
of the General Corporation Law of the State of Delevware, the
merger was consummated without a vote of Best stockholders.
Following consummation of the Merger, Best continues as the
surviving corporation and has become a wholly owned subsidiary of
GSX.
On June 14, 1995 (the effective date of the Merger), each Share
issued and outstanding immediately prior to June 14 (other than
Shares held in the treasury of Best or owned by G.S. Newco, GSX or
any direct or indirect wholly owned subsidiary of GSX, and other
than Shares held by stockholders who shall have demanded and
perfected appraisal rights under the General Corporation Law of the
State of Delaware) was cancelled and converted automatically into
the right to receive $21 in cash, without interest.
The aggregate purchase price of the Shares purchased and to be
purchased pursuant to the Offer and the Merger is approximately
$195 million. The amount of such purchase price has been
determined by multiplying the number of Shares issued and
outstanding as of June 14, 1995 by $21, the cash consideration paid
or to be paid per Share pursuant to the Offer and Merger. The
funds for such purchase price were obtained by G.S. Newco from GSX.
GSX obtained the funds through issuance of commercial paper.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of businesses acquired
The following report and audited financial
statements of Best and its subsidiaries are
attached hereto as Appendix A:
(i) Report of Independent Accountants dated
February 3, 1995;
(ii) Consolidated Statements of Income for the
years ended December 31, 1994, 1993 and
1992;
(iii) Consolidated Balance Sheets as of
December 31, 1994 and 1993;
(iv) Consolidated Statements of Cash Flows for
the years ended December 31, 1994, 1993
and 1992;
(v) Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1994, 1993 and 1992; and
(vi) Notes to Consolidated Financial
Statements.
The following unaudited financial statements of
Best and its subsidiaries are attached hereto as
Appendix B:
(i) Condensed Consolidated Statements of
Income (unaudited) for the three months
ended March 31, 1995 and March 31, 1994;
(ii) Condensed Consolidated Balance Sheets
(unaudited) as of March 31, 1995 and
December 31, 1994;
(iii) Condensed Consolidated Statements of Cash
Flows (unaudited) for the three months
ended March 31, 1995 and March 31, 1994;
and
(iv) Notes to Condensed Consolidated
Financial Statements (unaudited).
<PAGE>
(b) Pro forma financial information.
The following unaudited pro forma financial
information of GSX and Best is attached hereto as
Appendix C:
(i) Introductory Note;
(ii) Unaudited Pro Forma Condensed
Consolidated Statement of Earnings for
the twelve months ended December 31, 1994
and for the three months ended March 31,
1995; and
(iii) Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of March
31, 1995;
(iv) Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements.
(c) Exhibits
2a. Agreement and Plan of Merger, dated as of
May 10, 1995, by and among GSX, G.S.
Newco and Best is incorporated herein by
reference to Exhibit 1 to Amendment No. 9
to the Tender Offer Statement on Schedule
14D-9 filed on May 16, 1995 by GSX and
G.S. Newco with respect to the Offer.
23. Consent of Ernst & Young LLP, independent
accountants.
<PAGE>
Appendix A
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Best Power Technology, Incorporated
We have audited the accompanying consolidated balance sheets of
Best Power Technology, Incorporated as of December 31, 1993 and
1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements 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 Best Power Technology, Incorporated at December 31,
1993 and 1994, 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.
Ernst & Young LLP
Milwaukee, Wisconsin
February 3, 1995
<PAGE>
Best Power Technology, Inc.
Consolidated Statements of Income
Year ended December 31
1992 1993 1994
Net sales $118,795,517 $132,637,845 $149,440,737
Cost of goods sold 65,041,135 74,089,107 86,415,305
Gross profit 53,754,382 58,548,738 63,025,432
Operating expenses:
Selling and marketing 23,317,857 25,482,531 26,361,484
Administrative 8,695,445 7,539,048 10,920,708
Research and development 6,464,847 7,273,054 8,582,201
Incentive compensation - 1,287,000 -
38,478,149 41,581,633 45,864,393
Income from operations 15,276,233 16,967,105 17,161,039
Other income (expense):
Interest income 433,171 604,914 665,221
Interest expense (548,170) (331,860) (197,263)
Foreign currency gain (loss) (639,661) (7,734) 198,177
Miscellaneous (46,554) (9,144) 117,030
Minority interest - - 336,042
(801,214) 256,176 1,119,207
Income before income taxes 14,475,019 17,223,281 18,280,246
Income taxes 1,292,409 3,983,025 7,175,000
Net income $ 13,182,610 $ 13,240,256 $ 11,105,246
Net income per common share
(Note 1) $ - $ - $ 1.15
PRO FORMA DATA (unaudited)
(Note 2):
Income before income taxes $ 14,475,019 $ 17,223,281 $ -
Income taxes 5,267,644 5,459,928 -
Net income $ 9,207,375 $ 11,763,353 $ -
Net income per common share
(Note 1) $ 1.15 $ 1.36 $
Weighted average number of common
shares 8,011,671 8,664,124 9,620,580
See accompanying notes.
<TABLE>
<CAPTION>
<PAGE>
Best Power Technology, Inc.
Consolidated Balance Sheets
December 31
1993 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $19,100,693 $12,525,006
Accounts receivable - trade, less allowance of
$224,000 in 1993 and $450,000 in 1994 16,545,393 22,055,672
Other receivables 187,128 814,630
Inventories 16,292,302 24,902,474
Prepaid expenses and other assets 1,483,868 845,082
Deferred tax benefits 2,243,790 3,729,592
Total current assets 55,853,174 64,872,456
Property, plant and equipment, net 13,780,165 20,656,877
Intangible assets, net of accumulated amortization of
$19,000 in 1993 and $55,000 in 1994 231,858 3,912,403
Long-term portion of deferred tax benefits 268,019 -
Total assets $70,133,216 $89,441,736
December 31
1993 1994
Liabilities and stockholders equity
Current liabilities:
Accounts payable $8,049,744 $ 7,868,813
Advance payments -
customer service contracts 5,626,007 6,471,549
Income taxes payable 515,679 465,538
Accrued liabilities 3,727,376 6,603,997
Current maturities of long-term debt
and capital lease obligations 19,957 2,884,231
Total current liabilities 17,938,763 24,294,128
Advance payments -
customer service contracts 4,022,539 3,807,824
Long-term debt and capital lease obligations 45,699 2,276,804
Deferred tax liability 20,197 112,274
Total liabilities 22,027,198 30,491,030
Minority interest - 1,450,158
Commitments and contingencies (Notes 6, 7 and 8)
Stockholders equity:
Preferred stock - -
Common stock 96,579 96,707
Additional paid-in capital 38,497,117 38,658,307
Retained earnings 9,732,623 20,837,869
Cumulative foreign currency
translation adjustments (204,585) (23,585)
Notes receivable from stockholders (15,716) -
Less treasury shares (150,000-1994), at cost - (2,068,750)
Total stockholders equity 48,106,018 57,500,548
Total liabilities and stockholders equity $70,133,216 $89,441,736
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Best Power Technology, Inc.
Consolidated Statements of Cash Flows
Year ended December 31
1992 1993 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $13,182,610 $ 13,240,256 $ 11,105,246
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 1,839,939 2,374,327 2,059,054
Deferred tax benefit (1,509,324) (679,239) (1,104,490)
Minority interest - - (336,042)
Loss (gain) on disposal of equipment 50,094 (39,608) -
Incentive compensation - 1,287,000 -
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Receivables - trade (4,353,806) (2,846,093) (5,200,161)
Other receivables (286,729) 838,475 (580,517)
Inventories (3,005,796) (1,141,009) (7,767,320)
Prepaid expenses and other assets (127,128) (1,286,300) 451,570
Accounts payable 10,926 952,224 (180,931)
Advance payments - customer
service contracts 4,761,167 2,828,840 630,827
Income taxes payable (422,114) 116,447 (50,141)
Accrued liabilities 2,599,492 (1,822,924) 2,855,405
Total adjustments (443,279) 582,140 (9,222,746)
Net cash provided by operating
activities 12,739,331 13,822,396 1,882,500
INVESTING ACTIVITIES
Capital expenditures (2,161,132) (3,066,470) (5,543,348)
Proceeds from disposal of equipment 67,762 744,447 -
Cost of acquisitions, net of
cash acquired - - (7,904,701)
Net cash used in investing activities (2,093,370) (2,322,023) (13,448,049)
FINANCING ACTIVITIES
Proceeds from issuance of common
stock, net of stockholder notes 303,803 20,951,937 161,318
Acquisition of treasury stock - - (2,068,750)
Payments on notes receivable
from stockholders 63,111 461,184 15,716
Payments on notes payable - bank, net (6,000,000) - -
Proceeds from (payments on) debt and
capital lease obligations (196,481) (472,260) 805,601
Proceeds from BEST ASIA debt - - 4,289,777
Distributions paid (4,234,734) (14,966,377) -
Contributions by minority interest
in subsidiary - - 1,786,200
Net cash provided by (used in)
financing activities (10,064,301) 5,974,484 4,989,862
Net increase (decrease) in cash
and cash equivalents 581,660 17,474,857 (6,575,687)
Cash and cash equivalents at
beginning of year 1,044,176 1,625,836 19,100,693
Cash and cash equivalents at
end of year $ 1,625,836 $ 19,100,693 $ 12,525,006
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
Best Power Technology, Inc.
Consolidated Statements of Stockholders' Equity
Common Stock, $.01 Par Cumulative
Value, Authorized Foreign Notes
25 Million Shares Additional Currency Receivable Total
Outstanding Paid-in Retained Translation from Treasury Stockholders
Shares Amount Capital Earnings Adjustments Stockholders Stock Equity
<S> <C> <C> <C> <C>
Balance January 1, 1992 7,760,589 $77,606 $ 3,253,673 $ 15,018,429 $(35,149) $(327,895) $ $17,986,664
Net income 13,182,610 13,182,610
Foreign currency translation
adjustments (111,117) (111,117)
Issuance of stock 198,655 1,986 447,778 (145,961) 303,803
Payments on notes receivable
from stockholders 63,111 63,111
Distributions (6,476,118) (6,476,118)
Balance December 31, 1992 7,959,244 79,592 3,701,451 21,724,921 (146,266) (410,745) 24,948,953
Net income 13,240,256 13,240,256
Foreign currency translation
adjustments (58,319) (58,319)
Shares sold to public, net of
offering costs 1,590,000 15,900 20,768,637 20,784,537
Shares issued through
exercise of warrants 108,630 1,087 232,468 (66,155) 167,400
Incentive compensation
related to warrants 1,287,000 1,287,000
Payments on notes receiv-
able from stockholders 461,184 461,184
Distributions (12,724,993) (12,724,993)
Reclassify undistributed
S Corporation earnings 12,507,561 (12,507,561)
Balance December 31, 1993 9,657,874 96,579 38,497,117 9,732,623 (204,585) (15,716) 48,106,018
Net income 11,105,246 11,105,246
Foreign currency translation
adjustments 181,000 181,000
Issuance of stock 12,805 128 161,190 161,318
Repurchase of common shares
for treasury (150,000) (2,068,750) (2,068,750)
Payments on notes receiv-
able from stockholders 15,716 15,716
Balance December 31, 1994 9,520,679 96,707 $ 38,658,307 $20,837,869 $(23,585) $ $(2,068,750)$57,500,548
See accompanying notes.<PAGE>
Best Power Technology, Inc.
</TABLE>
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Best Power Technology, Incorporated (Technology or the
Company) and its wholly and majority owned foreign subsidiaries.
Significant intercompany transactions and balances have been
eliminated in consolidation. Minority interest represents the
minority stockholders proportionate share of the equity (balance
sheet) and the net loss (income statement) of the Company s BEST
ASIA joint venture (see Note 3).
On July 1, 1993, the Company merged with Best Power Technology
Sales Corporation (Sales), which had substantially the same
stockholder ownership, through the issuance of 958,814 common
shares of the Company in exchange for all of the common shares
outstanding of Sales. For financial reporting purposes, the merger
has been considered an exchange of common shares between
enterprises under common control. Accordingly, the transaction was
accounted for using historical amounts similar to the
pooling-of-interests method of accounting for a business
combination. Concurrent with the merger, the Company s status as an
S Corporation was terminated as of June 30, 1993, and the Company
became subject to tax at the corporate level beginning July 1,
1993. As a result, approximately $12.5 million of undistributed S
Corporation earnings were reclassified from retained earnings to
additional paid-in capital.
Financial Instruments and Derivatives
Following are disclosures of information about financial
instruments with off-balance-sheet risk and concentrations of
credit risk.
Off-Balance-Sheet Risk
The Company enters into forward foreign currency exchange contracts
to hedge various subsidiary transactions (e.g., purchases from
parent) denominated in other than local currencies. The purpose of
the Company s foreign currency hedging activities is to protect
these subsidiaries from the risk that the foreign subsidiaries
payables resulting from U.S. dollar denominated purchases of
products will be adversely affected by changes in exchange rates.
At December 31, 1993 and 1994, open contracts required the delivery
of foreign currencies (primarily French francs, deutsche marks and
pounds sterling) in exchange for approximately $1.7 million and
$4.3 million, respectively, at various exchange rates and dates
through April 1994 and August 1995, respectively. Gains and losses
on these forward contracts are deferred and recognized in the
period of the related hedged transaction (generally within one
year). At December 31, 1993 and 1994, the net deferred gain (loss)
on these contracts totaled approximately $79 thousand and $(193)
thousand, respectively.
The Company is exposed to credit loss in the event of
nonperformance by counterparties on foreign exchange contracts;
however, the Company does not anticipate nonperformance by any of
these counterparties. The amount of such exposure is generally the
unrealized gains in such contracts.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
credit risk consist principally of trade receivables. The sales of
products and services are to a wide range of end users, dealers and
distributors. Periodic credit evaluations of customers financial
condition are performed and generally collateral is not required,
except for certain foreign sales on which letters of credit are
obtained. Receivables from domestic customers generally are due in
30 days, whereas receivables from foreign subsidiary customers
generally are due in 30 to 90 days.
Cash and Cash Equivalents
Cash and cash equivalents consist of short-term, highly liquid
investments with original maturities of less than three months.
Inventories
Inventories are stated at the lower of cost, determined using the
first-in, first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation is
provided using the straight-line and accelerated methods over the
assets useful lives as follows:
Years
Land improvements 20
Buildings and improvements 40
Machinery and equipment 3 - 12
Leased equipment 5 - 6
Goodwill
Goodwill recorded in connection with the BEST ASIA acquisitions is
being amortized on a straight-line basis over 15 years.
Revenue Recognition
Revenue from product sales is recognized at the time of shipment.
Certain of the Company s distributors have been granted varying
return privileges on purchases of product. The effect of estimated
future returns is provided for in the period that the related sales
are recognized. As explained below, revenue and costs associated
with separately priced customer service contracts are recognized in
accordance with provisions of Financial Accounting Standards Board
(FASB) Technical Bulletin No. 90-1, "Accounting for Separately
Priced Extended Warranty and Product Maintenance Contracts, such
that (a) revenue is recognized either ratably over the contract
period or, when there is sufficient historical evidence on costs,
in proportion to the costs expected to be incurred over the
contract period; (b) costs are expensed as incurred (incremental
direct acquisition costs are not material); and (c) losses are
recognized on contracts where the expected future costs exceed
expected future revenue (no such contracts exist at December 31,
1992, 1993 or 1994).
Advance Payments Customer Service Contracts
Customer service contracts include customer protection plan
contracts, site warranty plan contracts and extended warranty plan
contracts.
Receipts on contracts are recorded as advance payments at the
inception of the contracts. The advance payments for customer
protection plan contracts are recognized as revenue as services are
performed (i.e., in proportion to the costs expected to be incurred
in performing the service), while advance payments for site
warranty plan contracts and extended warranty plans are recognized
as revenue on a straight-line basis over the term of the contract.
For all customer service contracts, costs are expensed as incurred.
Advertising Costs
The Company expenses advertising costs as incurred.
Accrued Warranty
The Company generally has a limited two-year warranty period
applicable to its products. An accrual is provided for estimated
future warranty costs based on the historical relationship of
actual warranty claims to sales.
Income Taxes
For 1992, Sales accounted for income taxes under Statement of
Financial Accounting Standards (SFAS) No. 96, "Accounting for
Income Taxes." SFAS No. 109, "Accounting for Income Taxes," which
superseded SFAS No. 96, was adopted prospectively in 1993 and had
no impact on Sales financial position or results of operations.
Technology was an S Corporation and, consequently, was not subject
to corporate income taxes until the July 1, 1993 merger with Sales.
Net Income Per Common Share
Net income per common share for 1994 is calculated by dividing net
income by the weighted average number of common shares outstanding.
Stock options were either antidilutive or not materially dilutive.
Historical net income per common share for 1992 and 1993 is not
meaningful.
Pro forma net income per common share for 1992 and 1993 is computed
by dividing pro forma net income by the weighted-average number of
common shares outstanding during each period retroactively adjusted
for the 170-for-1 stock split on June 1, 1993, the merger of
Technology and Sales on July 1, 1993, and the exercise of certain
warrants during 1993. Stock options were not materially dilutive
for 1992 or 1993.
2. PRO FORMA INCOME TAXES
Effective January 1, 1987, Technology and its stockholders elected
to be treated as an S Corporation under Subchapter S of the
Internal Revenue Code and similar provisions under state income tax
laws. Accordingly, Technology s taxable income was includable in
the individual tax returns of the stockholders. Due to the merger
of Technology and Sales on July 1, 1993, Technology s status as an
S Corporation was terminated and, as a result, its income was
subject to corporate income taxes from that date forward. The
accompanying historical financial statements, therefore, do not
include any provision or liability for income taxes of Technology
for any period during which it was an S Corporation.
For informational purposes, the accompanying consolidated
statements of income and certain disclosures in Note 7 include a
pro forma presentation for 1992 and 1993 that includes a provision
for income taxes on the earnings of the Company for the periods
during which it was an S Corporation. The pro forma adjustments
(i.e., additional income tax expense) were calculated based on the
income tax laws and rates in effect during those periods.
Also, in connection with the termination of its S Corporation
election, the Company recorded a nonrecurring income tax benefit -
(related to the reinstatement of a net deferred tax asset) which
increased net income and pro forma net income by $1.4 million, or
$.16 per share, for the year ended December 31, 1993.
3. FORMATION OF ASIA JOINT VENTURE AND ACQUISITIONS
During 1994, the Company entered into a joint venture agreement
with six Taiwanese nationals and formed Best Power Technology Asia
Limited (BEST ASIA). BEST ASIA is 51% owned by the Company and,
therefore, has been consolidated. The Company also has an option to
acquire up to an additional 9% of BEST ASIA common stock from the
minority stockholders at book value on June 30, 1996.
Under separate asset and stock purchase agreements, respectively,
BEST ASIA acquired certain net assets of Joinsoon Electronics
Manufacturers Co. Ltd. (Joinsoon), and the capital stock of
Infomate Corporation (Infomate), two local Taiwanese companies, for
approximately $7.9 million. Both Joinsoon and Infomate were
previously controlled by BEST ASIA s minority stockholders, and
Joinsoon manufactured certain products for the Company prior to its
acquisition. The acquisitions were accounted for as purchases and,
accordingly, the consolidated financial statements include the
operations of such acquired entities since October 1, 1994, their
effective acquisition dates.
The purchase price was financed through the $3.6 million initial
capitalization of BEST ASIA and a loan agreement with United World
Chinese Bank. The acquisitions resulted in BEST ASIA recording
approximately $3.3 million in goodwill, and had the following
effect on cash (in thousands):
Fair value of net assets acquired
(net of cash received) $ 7,905
Fair value of liabilities assumed -
Net effect on cash $ 7,905
The impact of the acquisitions is not material to the Company and,
as a result, pro forma financial information relating thereto has
not been presented.
BEST ASIA also has an option to acquire Cotek International Limited
(Cotek), a private Hong Kong company.
4. ADDITIONAL BALANCE SHEET INFORMATION
The detail supporting certain balance sheet groupings is shown
below:
December 31
1993 1994
Inventories:
Raw materials $ 8,612,402 $12,229,847
Work in process 185,024 498,782
Finished goods 7,494,876 12,173,845
$ 16,292,302 $ 24,902,474
Property, plant and equipment, net:
Land and land improvements $ 1,175,310 $ 2,465,726
Buildings and improvements 8,816,253 11,501,999
Machinery and equipment 9,806,037 12,701,338
Leased equipment 464,168 330,092
Construction in progress 633,441 2,661,032
Total property, plant and
equipment, at cost 20,895,209 29,660,187
Less accumulated depreciation (7,115,044) (9,003,310)
$ 13,780,165 $ 20,656,877
Accrued liabilities:
Payroll expense $ 2,405,903 $ 2,946,727
Payroll taxes and other
withholdings 216,228 508,008
Taxes other than income and payroll 363,102 819,881
Warranty 600,000 1,000,000
Other expenses 142,143 1,329,381
$ 3,727,376 $ 6,603,997
<PAGE>
5. STATEMENT OF CASH FLOWS
Noncash transactions and supplemental cash flow information are
as follows:
Year ended December 31
1992 1993 1994
Profit distribution declared $ 2,241,384 $ - $ -
Cash payments for:
Interest 666,095 452,586 173,822
Income taxes 3,226,584 4,731,783 8,613,854
6. LINE OF CREDIT AND LONG-TERM DEBT
In August 1993, the Company obtained a $15 million unsecured credit
facility, which expires in August 1995. The facility provides the
Company with an interest rate option of (a) the bank s prime rate
or (b) the London InterBank Offering Rate (LIBOR) plus 1.35% fixed
for 30, 60 or 90 days. The agreement provides for a commitment fee
at an annual rate of 1/4 of 1% of the unused facility. The agreement
also contains certain covenants including: maintenance of minimum
tangible net worth, as defined; limitations on the issuance of
additional debt, the sale of significant assets or stock of the
Company, or a merger involving the Company; and maintenance of
certain financial ratios. No amounts were outstanding under the
facility at December 31, 1993 or 1994. However, the available
borrowings under the facility have been reduced by a $3.7 million
standby letter of credit issued by the lender on behalf of the
Company as collateral for certain bank debt of BEST ASIA as
described below.
<TABLE>
<CAPTION>
Long-term debt and capital lease obligations consist of the
following at December 31:
1993 1994
<S> <C> <C>
Note payable by BEST ASIA to local bank on
October 3, 1995; interest payable monthly at
prime plus .825%; secured by a U.S. standby
letter of credit $ - $ 2,662,609
Mortgage note payable by BEST ASIA to local
bank in 12 equal semi-annual
installments beginning in October 1995
through April 2001; interest payable
monthly at prime plus .825%; secured by land
and building - 2,396,348
Other 65,656 102,078
65,656 5,161,035
Less current portion 19,957 2,884,231
Long-term debt and capital lease
obligations, less current portion $ 45,699 $ 2,276,804
</TABLE>
<PAGE>
7. INCOME TAXES
<TABLE>
<CAPTION>
Following is a summary of income before income taxes:
Year ended December 31
1992 1993 1994
<S> <C> <C> <C>
Domestic $13,227,058 $15,599,653 $19,056,651
Combined foreign subsidiary income 1,426,598 2,241,232 224,561
Elimination of intercompany profits (178,637) (617,604) (1,000,966)
Consolidated income before income taxes $14,475,019 $17,223,281 $18,280,246
</TABLE>
<TABLE>
<CAPTION>
The provision for income taxes consists of the following:
Pro Forma
Historical (Unaudited see Note 2)
1992 1993 1994 1992 1993
<S> <C> <C> <C> <C> <C>
Current:
Federal $ 2,315,341 $ 3,428,294 $ 6,912,436 $ 5,964,060 $ 5,038,639
State 426,928 647,610 1,290,087 1,356,672 1,053,237
Foreign 59,464 586,360 76,967 59,464 586,360
2,801,733 4,662,264 8,279,490 7,380,196 6,678,236
Deferred:
Federal (1,280,138) (558,075) (799,076) (1,761,840) (988,544)
State (237,737) (110,546) (171,911) (359,263) (219,146)
Foreign 8,551 (10,618) (133,503) 8,551 (10,618)
(1,509,324) (679,239) (1,104,490) (2,112,552) (1,218,308)
Total
provision $ 1,292,409 $ 3,983,025 $ 7,175,000 $ 5,267,644 $ 5,459,928
</TABLE>
Differences between the provision for income taxes at the U.S. statutory income
tax rate and the provision in the accompanying consolidated statements of
income are as follows:
<TABLE>
<CAPTION> Pro Forma
Historical (Unaudited see Note 2)
1992 1993 1994 1992 1993
<S> <C> <C> <C> <C> <C>
Provision at federal statutory
rate $ 4,921,506 $6,028,150 $6,398,086 $4,921,506 $6,028,150
Increase (decrease) resulting from:
S Corporation income taxable to
stockholders (3,472,469) (1,269,070)
Current benefit from foreign loss
carryforwards (246,105) (148,376) (91,869) (246,105) (148,376)
Foreign losses that do not provide
current benefit 41,877 70 291,030 41,877 70
Foreign sales corporation benefit (148,410) (165,249) (152,062) (148,410) (165,249)
State income taxes, net of federal
benefit 127,373 540,090 726,814 661,817 747,923
Reinstatement of net deferred tax
asset (1,399,385) (1,399,385)
Effect of minority interest (117,615)
Other, net 68,637 396,795 120,616 36,959 396,795
Provision for income taxes $1,292,409 $ 3,983,025 $7,175,000 $5,267,644 $5,459,928
Deferred tax assets and (liabilities) as of December 31, 1993 and 1994, are as follows:
</TABLE>
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation and amortization $ (607,578) $ (953,983)
Deferred tax assets:
Advance payments customer service contracts 2,081,791 2,284,127
Nondeductible accruals various 1,017,399 2,145,581
Tax relief available on distribution of German subsidiary
undistributed earnings 141,593
Foreign operating loss carryforwards 81,000 989,000
Total deferred tax assets 3,180,190 5,560,301
Valuation allowance for deferred tax assets (81,000) (989,000)
Net deferred tax assets 3,099,190 4,571,301
Net deferred taxes $2,491,612 $3,617,318
</TABLE>
<TABLE>
<CAPTION>
Deferred taxes are presented on the accompanying consolidated balance sheet as of December 31, 1993 and
1994, as follows:
1993 1994
<S> <C> <C>
Current portion of deferred tax benefits $ 2,243,790 $ 3,729,592
Long-term portion of deferred tax benefits 268,019
Long-term deferred tax liability (20,197) (112,274)
Net deferred taxes $ 2,491,612 $ 3,617,318
</TABLE>
The deferred tax provision for 1992 resulted principally from
temporary differences between accounting for financial statement
purposes and accounting for tax purposes for revenue on customer
service contracts (approximately $1.2 million) and for certain
nondeductible accruals ($290 thousand).
In connection with the adoption of SFAS No. 109 in 1993, a gross
deferred tax asset has been established for the tax benefit of net
operating loss carryforwards of certain foreign subsidiaries. In
accordance with SFAS No. 109 s more likely than not provisions,
a valuation allowance has been established to the full extent of
such potential future benefits. The foreign net operating loss
carryforwards of approximately $3.9 million as of December 31,
1994, are available to offset future taxable income of the
subsidiaries. Loss carryforwards of $313 thousand, $763 thousand,
$925 thousand, and the remaining $1.9 million will expire in 1995,
1996, 1997 and 1998 or later, respectively.
Provisions are made for estimated U.S. and foreign income taxes
(less available tax credits and deductions) that would be incurred
on the remittance of the Company s share of foreign subsidiaries
undistributed earnings, less those amounts deemed to be reinvested
indefinitely. At December 31, 1993, deferred taxes had not been
provided on approximately $1.2 million of undistributed foreign
earnings. During 1994, the Company determined that its German
subsidiary s undistributed earnings, which previously had been
considered invested indefinitely, would eventually be distributed.
That decision resulted in a net deferred tax benefit of $142
thousand as a result of the lower German statutory rate applicable
to distributable earnings. As of December 31, 1994, undistributed
earnings of foreign subsidiaries considered to be indefinitely
reinvested are not significant.
The Internal Revenue Service (IRS) currently is examining federal
income tax returns of Technology and Sales for 1990 and 1991. The
statute of limitations has expired for 1988 and 1989. Amounts of
potential claims or settlements cannot be anticipated. In the case
of Technology, the Company has entered into an agreement to
indemnify its stockholders against additional taxes (including
interest and penalties) arising from an audit of Technology s tax
returns for any period during which it was an S Corporation.
Resolution of potential settlements with the IRS resulting in
additional liability for stockholders of Technology while filing as
an S Corporation will result in additional distributions by
Technology in accordance with the indemnification agreement.
8. LEASE COMMITMENTS AND RELATED-PARTY
TRANSACTIONS
The Company leases certain property and equipment, including
offices, warehouse facilities and other equipment, under operating
leases which expire over the next 2 to 13 years. Future minimum
annual lease payments for those operating leases having initial or
remaining noncancelable terms in excess of one year are:
$349,453 1995; $218,294 1996; $174,367 1997; $82,675 1998;
$82,675 1999; and $483,376 thereafter. Rent expense was $697,825,
$500,605 and $607,272 in 1992, 1993 and 1994, respectively.
In May 1994, the Company entered into an aircraft lease agreement
and an aviation services agreement with two separate companies
controlled by an officer/stockholder of the Company. Both
agreements expire after one year (May 1995) and require a combined
basic monthly rent/fee of $24 thousand. The aircraft lease also
includes a usage fee of $.75 per statute mile and a hangar fee of
$2 thousand per month. The aviation services agreement requires a
fee of $100 per hour for each hour in excess of forty hours per
pilot per week. During 1994, the Company expensed $552 thousand
related to these agreements (and under informal agreements prior to
May 1994), which included various aircraft repair and maintenance
expenditures as well as pilot travel expenses. During 1992 and
1993, the Company expensed $144 thousand in each year of payments
made to one of these companies for unlimited flight services.
9. STOCKHOLDERS EQUITY
Preferred Stock
The Company has authorized 10 million shares of preferred stock,
par value $.01 per share, of which no shares are issued and
outstanding. The Board of Directors is authorized to determine the
voting, dividend, redemption and liquidation preferences and
limitations pertaining to such shares which may have the effect of
delaying, deferring or preventing a future takeover or change in
control of the Company.
Employee Stock Option Plan
The 1993 Stock Option Plan (1993 Option Plan) provides for the
granting of up to 1,000,000 stock options to certain key employees.
Options may be granted to participants, which constitute incentive
stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or nonstatutory stock options.
The option price per share will be not less than 100% of the fair
market value as of the date of the grant of the option (110% in the
case of incentive stock options). Options granted under the 1993
Option Plan generally become exercisable within the fourth through
tenth years following the grant.
Director Stock Option Plan
A stock option plan for outside directors (Director Stock Option
Plan) has terms closely paralleling the 1993 Stock Option Plan. The
Company has reserved 100,000 shares for the Director Stock Option
Plan and has granted 10,000 shares at $19.25 per share through
December 31, 1994.
Additional information relating to option shares under the 1993
Option Plan, and Director Stock Option Plan, is as follows:
Number of Options
1993 1994
Options outstanding at
beginning of year 182,302
Options granted 182,302 73,300
Options exercised
Options cancelled (42,500)
Options outstanding
at end of year 182,302 213,102
Exercise prices of
outstanding options $13.48 to $19.25 $12.75 to $19.25
None of the outstanding options were exercisable at either December
31, 1993 or 1994. In January 1995, 73,066 options were cancelled.
Employee Stock Purchase Plan
The 1993 Employee Stock Purchase Plan (1993 Purchase Plan) allows
employees to purchase common stock of the Company in an amount not
to exceed $25 thousand fair market value as of the grant date, at
85% of the market value per share on the dates of exercise. The
Company has reserved 500,000 shares for issuance under the 1993
Purchase Plan. During 1994, 12,805 shares of common stock were
issued under the plan (none issued in 1993).
At December 31, 1994, 1,587,195 shares of authorized but unissued
common stock have been reserved for potential future issuance under
the Company s various stock option and purchase plans.
Stock Warrant Plan
During 1993, 108,630 shares of common stock were issued upon
exercise of certain stock warrants granted in previous years. The
Company recorded a nonrecurring incentive compensation charge of
approximately $1.3 million (approximately $800 thousand or $.09 per
share, net of tax) in 1993 in connection with the exercise of such
warrants. The Stock Warrant Plan was terminated by the Company s
Board of Directors.
10. EMPLOYEE BENEFIT PLANS
401(k) Plan
A 401(k) plan, which covers substantially all employees meeting
minimum eligibility requirements, requires that the Company match
a certain percent of employee contributions and allows the Company
to make optional year-end contributions. Total 401(k) plan expense
was $288,060, $293,914 and $403,225 in 1992, 1993 and 1994,
respectively.
Voluntary Employees Beneficiary Association
A Voluntary Employees Beneficiary Association (VEBA) trust was
established in September 1991, principally to administer employee
health care costs. During 1992, 1993 and 1994, the Company made
contributions to the VEBA of $1,171,317, $1,338,475 and $1,458,936,
respectively.
The Company has no significant obligations to its present or former
employees with respect to retiree health care benefits or other
nonpension postretirement benefits. Accordingly SFAS No. 106,
Employers Accounting for Postretirement Benefits Other Than
Pensions, had no impact on the Company.
11. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one business segment the manufacture,
sale and service of uninterruptible, computer-grade power systems.
Comparative data for the domestic and foreign operations is as
follows:
<TABLE>
<CAPTION>
Year ended December 31
1992 1993 1994
<S> <C> <C> <C>
Sales:
All domestic operations $112,421,969 $125,229,092 $140,978,487
Sales to foreign subsidiaries (11,807,817) (16,399,168) (21,809,369)
Domestic sales to unaffiliated
customers 100,614,152 108,829,924 119,169,118
Foreign subsidiaries:
Europe 14,575,677 18,073,145 23,721,693
Asia 2,176,543 3,033,806 4,289,855
Other 1,429,145 2,700,970 3,069,422
Sales to parent - - (809,351)
$118,795,517 $132,637,845 $149,440,737
Net income (loss):
Domestic operations$ 11,903,179 $ 11,653,297 $ 10,903,692
Foreign subsidiaries:
Europe 573,436 790,854 227,428
Asia 87,983 138,323 (541,280)
Other 618,012 657,782 515,406
$ 13,182,610 $ 13,240,256 $ 11,105,246
Identifiable assets at December 31:
Domestic operations $ 39,384,594 $ 60,660,479 $ 66,363,735
Foreign subsidiaries:
Europe 6,068,245 7,039,367 9,640,067
Asia 939,695 1,106,912 11,828,096
Other 1,218,941 1,326,458 1,609,838
$ 47,611,475 $ 70,133,216 $89,441,736
</TABLE>
Sales to foreign subsidiaries are at prices approximating those charged to
unaffiliated customers. Export sales to unaffiliated customers by domestic
operations totaled approximately $15.2 million, $18.5 million and $21.8 million
during 1992, 1993 and 199, respectively.
12. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITOR'S REPORT
Effective June 13, 1995, the Company was acquired by General Signal
Corporation pursuant to a cash tender offer of $21 per common share. In
connection with the acquisition, the Company incurred $4.7 million in
nonrecurring charges, which were recorded in May 1995.
<PAGE>
Appendix B
<TABLE>
<CAPTION>
Best Power Technology, Incorporated
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Net sales $35,284,429 $33,005,077
Cost of goods sold 21,118,741 19,309,329
Gross profit 14,165,688 13,695,748
Operating expenses:
Selling and marketing 6,222,603 5,384,542
Administrative 2,764,055 2,384,286
Research and development 1,999,156 2,171,118
10,985,814 9,939,946
Income from operations 3,179,874 3,755,802
Other income (expense):
Interest income 143,928 184,579
Interest expense (133,765) (12,327)
Foreign currency gain 477,348 107,669
Miscellaneous (18,819) 784
Minority interest 367,131 -
835,823 280,705
Income before income taxes 4,015,697 4,036,507
Income taxes 1,487,403 1,374,576
Net income $2,528,294 $2,661,931
Net income per common share $ .27 $ .28
Weighted average number
of common shares 9,522,833 9,657,874
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.<PAGE>
<TABLE>
<CAPTION>
Best Power Technology, Incorporated
Condensed Consolidated Balance Sheets
March 31 December 31
1995 1994
Unaudited
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $14,256,192 $12,525,006
Accounts receivable - trade allowance
of $440,000 in 1995 and $450,000
in 1994 21,460,185 22,055,672
Other receivables 253,348 814,630
Inventories (Note 2) 25,386,791 24,902,474
Prepaid expenses and other assets 1,301,776 845,082
Deferred tax benefits 3,513,989 3,729,592
Total current assets 66,172,281 64,872,456
Property, plant and equipment, net 21,526,541 20,656,877
Intangible assets, net 3,851,678 3,912,403
Total assets $91,550,500 $89,441,736
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 7,510,966 $ 7,868,813
Advance payments - customer service
contracts 6,495,219 6,471,549
Income taxes payable 681,590 465,538
Accrued liabilities 6,270,822 6,603,997
Current maturities of long-term debt
and capital lease obligations 2,912,556 2,884,231
Total current liabilities 23,871,153 24,294,128
Advance payments - customer service contracts 3,817,548 3,807,824
Long-term debt and capital lease obligations 2,289,649 2,276,804
Deferred tax liability 151,962 112,274
Total liabilities 30,130,312 30,491,030
Minority interest 1,083,027 1,450,158
Stockholders' equity:
Preferred stock - -
Common stock 96,762 96,707
Additional paid-in capital 38,720,710 38,658,307
Retained earnings 23,366,163 20,837,869
Cumulative foreign currency translation
adjustments 222,276 (23,585)
Treasury stock (2,068,750) (2,068,750)
Total stockholders' equity 60,337,161 57,500,548
Total liabilities and stockholders' equity $91,550,500 $89,441,736
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
Best Power Technology, Incorporated
Condensed Consolidated Statement of Stockholders' Equity
Three months ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Common Stock, $.01 Par Foreign
Value, Authorized Additional Currency Treasury Total
25,000,000 Shares Paid-in Retained Translation Stock Stockholders'
Shares Amount Capital Earnings Adjustments Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1995 9,520,679 $96,707 $38,658,307 $20,837,869 $ (23,585) $(2,068,750) $57,500,548
Net Income - - - 2,528,294 - - 2,528,294
Foreign currency
translation
adjustments - - - - 245,861 - 245,861
Issuance of stock 5,499 55 62,403 - - - 62,458
Balance March 31, 1995 9,526,178 96,762 38,720,710 23,366,163 222,276 (2,068,750) $60,337,161
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.<PAGE>
Best Power Technology, Incorporated
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended March 31
1995 1994
Operating activities
Net Income $2,528,294 $2,661,931
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation and amortization 676,190 475,621
Deferred tax benefits 255,291 (197,257)
Minority interest (367,131) -
Changes in operating assets and
liabilities:
Receivables - trade 595,487 (677,500)
Other receivables 561,282 (306,323)
Inventories (484,317) (3,178,048)
Prepaid expenses and other
assets (210,833) 722,495
Accounts payable (357,847) (840,186)
Advance payments - customer
service contracts 33,394 183,905
Income taxes payable 216,052 689,773
Accrued liabilities (333,175) (114,298)
Total adjustments 584,393 (3,241,818)
Net cash provided by (used in)
operating activities 3,112,687 (579,887)
Investing activities
Capital expenditures (1,485,129) (806,968)
Net cash used in investing activities (1,485,129) (806,968)
Financing activities
Proceeds from issuance of common stock 62,458 -
Payments on notes receivable from
stockholders - 15,716
Proceeds from debt and capital lease
obligations, net 41,170 -
Net cash provided by financing activities 103,628 15,716
Net increase (decrease) in cash and cash
equivalents 1,731,186 (1,371,139)
Cash and cash equivalents at beginning
of year 12,525,006 19,100,693
Cash and cash equivalents at end of
period $14,256,192 $17,729,554<PAGE>
Best Power Technology, Incorporated
Notes to Condensed Consolidated Financial Statements
March 31, 1995
1. Basis of Presentation
The accompanying condensed consolidated financial statements of
Best Power Technology, Incorporated and its subsidiaries (the
Company) have been prepared in accordance with generally
accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-
Q and Article 10 of Regulation 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
considered necessary for a fair presentation of the financial
position and results of operations have been included. These
adjustments are of a normal recurring nature. Operating
results for the three month period ended March 31, 1995 are not
necessarily indicative of the results that might be expected
for the year ended December 31, 1995. These interim statements
should be read in conjunction with the audited financial
statements, related footnotes and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in the Company's 1994 Annual Report to Stockholders.
2. Inventories
The components of inventories are as follows:
March 31 December 31
1995 1994
(Unaudited)
Raw materials $13,671,289 $12,229,847
Work in process 717,670 498,782
Finished goods 10,997,832 12,173,845
Total $25,386,791 $24,902,474
3. Subsequent Event
On May 10, 1995, the Company announced that it had
entered into an agreement with General Signal Corporation under
which General Signal would acquire the Company for $200
million, or $21.00 per share, in cash.
The agreement, which was unanimously approved by the
Company's Board of Directors, provides for General Signal to
make a cash tender offer for all outstanding shares of the
Company's common stock at a price of $21.00 per share. The
tender offer will be followed as soon as possible by a second-
step merger in which each share of the Company's common stock
not acquired in the tender offer will be converted into the
right to receive $21.00 in cash.
The tender offer is subject to customary terms and
conditions, including the valid tender of a majority of the
outstanding shares and the expiration or termination of any
applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
<PAGE>
Appendix C
General Signal Corporation
Unaudited Pro Forma Condensed Consolidated Financial Statements
Introductory Note
The following unaudited pro forma condensed consolidated financial
statements have been prepared by GSX management. These statements
reflect GSX's acquisition of Best and combine the historical
consolidated financial statements of GSX and Best for the periods
indicated using the purchase method of accounting.
The unaudited pro forma condensed consolidated balance sheet
reflects adjustments as if the acquisition had occurred on March
31, 1995. The unaudited pro forma condensed consolidated statement
of earnings has been prepared assuming the acquisition of Best had
occurred at the beginning of GSX's fiscal year ended December 31,
1994. These pro forma statements should be read in conjunction
with the historical consolidated financial statements and related
notes of GSX and Best.
The pro forma condensed consolidated financial statements have been
prepared using the following facts and assumptions:
GSX acquired the common stock of Best for a total cash payment of
approximately $195 million. GSX has acquired 97% of the
outstanding common stock of Best as of June 14, 1995 and expects to
acquire the remaining shares before the end of the third quarter of
1995.
GSX will borrow, on a long-term basis, the $195 million in funds
necessary to finance the acquisition.
GSX preliminarily estimates that it will incur transaction costs of
$2.5 to $3.0 million and combination and integration costs ranging
from $9.2 to $12.7 million. The transaction costs include
investment banker and professional fees. The combination and
integration costs include severance and relocation of key personnel
and product lines, primarily related to existing General Signal
locations, and factory rearrangement and administrative
rationalization, primarily at Best's locations. The pro forma
balance sheet and statement of earnings have not been adjusted to
reflect these potential liabilities as the specific amounts of the
liabilities have not been finalized.
Transaction and severance costs related to Best employees will be accounted
for as purchase price adjustments, severance costs and certain exit costs
related to existing GSX locations will be accrued as one-time restructuring
charges as of June 30, 1995, and all other combination and integration
costs will be expensed as incurred over the next twelve months as the plans
are implemented. Total purchase price adjustments resulting from these
costs are expected to range from $3.7 to $5.3 million and one-time
restructuring charges are expected to range from $4.5 to $5.8 million.
The purchase price of Best will be allocated to the assets and
liabilities of Best based upon their respective fair values at the
date of acquisition. Such allocations will be based on evaluations
and estimations which are still in process. Preliminarily, GSX
estimates that it will make adjustments reducing the values of
inventories and accounts receivable and increasing warranty and
income tax accruals in an amount ranging from $6.3 to $15.7
million. For purposes of the accompanying pro forma statements,
the pro forma adjustments have not been reflected because the
preliminary valuation is subject to a final determination of fair
values. The remaining excess of cost over the net assets of Best
after the valuation adjustments discussed above will be allocated
to goodwill and any other identifiable intangibles.
Pro forma adjustments to the condensed consolidated statement of
earnings reflecting anticipated cost savings and other synergies
resulting from the planned integration of Best and GSX are, under
most circumstances, not permitted and accordingly have not been
reflected in the pro forma financial statements.
The pro forma results are not intended to be a projection of future
results and are not necessarily indicative of the results which
would have occurred if the business combination had been in effect
on the dates presented.
<PAGE>
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Year Ended December 31, 1994
(In millions, except per share data)
Pro
GSX Best Adjustments forma
Net Sales $1,527.7 $149.4 $1,677.1
Cost of sales 1,109.5 86.4 1,195.9
Gross profit 418.2 63.0 481.2
Operating expenses:
SG&A 292.3 - 45.3(c) 342.6
5.0(e)
Disposition of businesses
and special items (46.2) (46.2)
Selling and marketing 26.4 (26.4)(c) -
Administrative 10.9 (10.9)(c) -
Research and development 8.6 (8.6)(c) -
Total operating costs and
expenses 246.1 45.9 4.4 296.4
Operating earnings 172.1 17.1 (4.4) 184.8
Other income (expense):
Interest income 0.7 (0.7)(c) -
Interest expense, net (11.8) (0.2) (11.7)(d) (23.0)
0.7 (c)
Foreign currency gain (loss) 0.2 (0.2)(c) -
Miscellaneous 0.1 (0.1)(c) -
Minority interest 0.3 (0.3)(c) -
(11.8) 1.1 (12.3) (23.0)
Earnings from continuing
operations 160.3 18.2 (16.7) 161.8
Income taxes 56.2 7.2 (4.7) 58.7
Earnings from continuing
operations $104.1 $11.0 $(12.0) $103.1
Earnings per share of
common stock from
continuing operations $2.20 $2.18
Average common shares
outstanding 47.3 47.3
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
General Signal Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Three Months Ended March 31, 1995
(In millions, except per share data)
Pro
As Reported GSX Best Adjustments forma
Net Sales $411.0 $35.3 $446.3
Cost of sales 293.3 21.1 314.4
Gross profit 117.7 14.2 131.9
SG&A expenses 71.6 10.2(c) 83.1
1.3(e)
Selling and marketing 6.2 (6.2)(c) -
Administrative 2.8 (2.8)(c) -
Research and development 2.0 (2.0)(c) -
Total operating costs and
expenses 71.6 11.0 0.5 83.1
Operating earnings 46.1 3.2 (0.5) 48.8
Other income (expense):
Interest income 0.1 (0.1)(c) -
Interest expense, net (4.1) (0.1) (2.9)(d) (7.0)
0.1 (c)
Foreign currency gain (loss) 0.5 (0.5)(c) -
Minority interest 0.3 (0.3)(c) -
(4.1) 0.8 (3.7) (7.0)
Earnings before income taxes 42.0 4.0 (4.2) 41.8
Income taxes 14.7 1.5 1.2 15.0
Net earnings $27.3 $2.5 ($3.0) $26.8
Earnings per share of
common stock $0.58 $0.57
Average common shares
outstanding 47.2 47.2
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
General Signal Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 1995
(In millions, except per share data)
Pro
GSX Best Adjustments forma
Cash and cash equivalents $5.0 $14.3 $19.3
Accounts receivable 259.7 21.7 281.4
Inventories 217.2 25.4 242.6
Prepaid expenses and other
current assets 46.7 1.3 48.0
Assets held for sale 160.0 - 160.0
Deferred income taxes 44.1 3.5 47.6
Total current assets 732.7 66.2 - 798.9
Property, plant and
equipment 279.9 21.5 301.4
Intangibles 187.8 3.9 (60.3)(a) 326.4
195.0 (b)
Other assets 144.3 - 144.3
Deferred income taxes 17.9 - 17.9
Total assets $1,362.6 $91.6 $134.7 $1,588.9
Short-term borrowings and
current maturities $3.9 $2.9 $6.8
Accounts payable 136.6 7.5 144.1
Accrued expenses 151.7 12.8 164.5
Income taxes 26.9 0.7 27.6
Total current liabilities 319.1 23.9 - 343.0
Long-term debt, less
current maturities 308.1 2.3 195.0(b) 505.4
Accrued postretirement and
postemployment benefits 156.7 - 156.7
Other liabilities 12.2 5.1 17.3
Total long-term
liabilities 477.0 7.4 195.0 679.4
Shareholders' equity 566.5 60.3 (60.3)(a) 566.5
Total liabilities and
shareholders' equity $1,362.6 $91.6 $134.7 $1,588.9
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.<PAGE>
General Signal Corporation
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
The adjustments to give pro forma effect to GSX's acquisition of
Best and the estimated purchase price allocation at March 31, 1995
are as follows:
(a) The shareholders' equity of Best of $60.3 million has
been reclassified to intangibles.
(b) Consists of long-term borrowings by GSX of $195 million
to finance the purchase of Best.
(c) Certain reclassifications have been made to conform GSX
and Best presentation of selling, general and
administrative expenses.
(d) Interest expense was recognized as if the $195 million of
debt issued to acquire Best had been outstanding from the
beginning of the period. The debt is assumed to carry a
financing rate of 6 percent per year.
(e) Goodwill and other identified intangibles are expected to
range from $150 to $160 million. The pro forma statement
of earnings reflects amortization of $150 million of
goodwill and intangibles over 30 years since the
preliminary valuation is subject to final determination
of fair values and related lives. The amortization is
reflected in the pro forma statement of earnings as if
the goodwill were amortized from the beginning of the
period.
<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
June 26, 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
June 26, 1995
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-33929) of General Signal Corporation and
in the related Prospectus of our report dated February 3, 1995,
with respect to the consolidated financial statements of Best Power
Technology, Incorporated as of December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994
included in this Form 8-K dated June 26,
1995.
Milwaukee, Wisconsin Ernst & Young LLP
