PLEASE NOTE: THIS IS NOT AN AMENDED FILING. WE ARE SUBMITTING
THIS FILING BECAUSE OUR ORIGINAL EDGAR FILING WAS TRUNCATED
DURING SUBMISSION.
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending March 31, 1994
Commission file number 1-8591
FIGGIE INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 52-1297376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4420 Sherwin Road, Willoughby, Ohio 44094
(Address of principal executive offices) (Zip Code)
</TABLE>
(216) 953-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 19, 1994
<S> <C>
Class A Common Stock, par value $.10 per share 13,672,445
Class B Common Stock, par value $.10 per share 4,943,495
</TABLE>
Total number of pages contained in this report 18.
<PAGE> 2
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
<S> <C>
Consolidated Statements of Income with Selected
Consolidating Data For the Three Months Ending
March 31, 1994 and 1993 3
Consolidated Balance Sheets with Selected
Consolidating Data March 31, 1994 and
December 31, 1993 4 - 5
Consolidated Statements of Cash Flow
For the Three Months Ending
March 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 7 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 14
PART II. OTHER INFORMATION 15
EXHIBIT LIST 16
EXHIBIT 99 17 - 18
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDING MARCH 31, 1994 AND 1993
(in thousands of dollars except for per share data)
(U N A U D I T E D)
Consolidated Consolidated
1994 1993
<S> <C> <C>
SALES AND OTHER INCOME FROM CONTINUING OPERATIONS:
Net Sales $ 181,406 $ 181,068
Other income/(expense) (2,668) 2,113
Total sales and other income 178,738 183,181
COSTS AND EXPENSES FROM CONTINUING OPERATIONS:
Cost of sales 152,274 133,331
Selling, general, and administrative expenses 45,677 35,497
Bad debt expense 604 519
Interest expense, net 10,821 8,635
Restructuring charges 547 5,705
Total costs and expenses 209,923 183,687
MINORITY INTEREST 18 0
INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR TAXES ON INCOME (31,167) (506)
PROVISION FOR TAXES ON INCOME FROM
CONTINUING OPERATIONS:
Federal income taxes/(benefits) (10,246) (128)
State income taxes/(benefits) (584) (13)
NET INCOME/(LOSS) BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES (20,337) (365)
NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS 0 4,179
NET INCOME/(LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING FOR INCOME TAXES (20,337) 3,814
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES 0 5,839
NET INCOME/(LOSS) $ (20,337) $ 9,653
WEIGHTED AVERAGE SHARES 17,855,702 17,598,831
EARNINGS (LOSS) PER COMMON SHARE FROM
CONTINUING OPERATIONS $ (1.14) $ (0.02)
EARNINGS (LOSS) PER COMMON SHARE FROM
DISCONTINUED OPERATIONS $ 0.00 $ 0.24
EARNINGS PER COMMON SHARE FROM
CHANGE IN ACCOUNTING FOR INCOME TAXES $ 0.00 $ 0.33
EARNINGS (LOSS) PER COMMON SHARE ON NET INCOME $ (1.14) $ 0.55
COMMON DIVIDENDS DECLARED
CLASS A $ 0.00 $ 0.125
CLASS B $ 0.00 $ 0.125
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(in thousands of dollars)
(U N A U D I T E D)
Consolidated Consolidated
Mar 31, 1994 Dec 31, 1993
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,961 $ 6,833
Marketable securities 63,935 27,314
Trade accounts receivable, less allowance for
uncollectible accounts of $1,676 at 3/31/94
and $1,376 at 12/31/93 143,268 144,287
Finance receivables 4,146 5,715
Inventories 123,917 126,142
Prepaid expenses 19,543 16,499
Recoverable income taxes 1,317 36,283
Net assets related to discontinued operations 163,734 170,435
Total current assets 524,821 533,508
PROPERTY, PLANT, AND EQUIPMENT:
Land and land improvements 51,597 52,272
Buildings and leasehold improvements 92,052 91,130
Machinery and equipment 163,128 155,071
Rental equipment 41,889 39,800
Oil and gas properties 48,285 47,901
396,951 386,174
Accumulated depreciation and amortization (137,612) (131,589)
259,339 254,585
Property under capital leases, less accumulated
amortization of $12,736 at 3/31/94 and
$14,825 at 12/31/93 10,577 12,540
Net property, plant, and equipment 269,916 267,125
OTHER ASSETS:
Investments in affiliates 10,345 10,321
Patents 1,398 1,425
Goodwill 58,163 58,532
Prepaid pension costs 11,217 10,591
Other 95,186 96,959
Long-term finance receivables 14,788 19,942
Total Assets $ 985,834 $ 998,403
The accompanying Notes to Consolidated Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
(in thousands of dollars)
(U N A U D I T E D)
Consolidated Consolidated
Mar 31, 1994 Dec 31, 1993
<S> <C> <C>
LIABILITIES
Current Liabilities:
Notes payable $ 115,818 $ 90,891
Current maturities of long-term debt 109,328 109,674
Accounts payable 91,808 113,900
Accrued salaries and wages 16,613 14,910
Other accrued expenses 78,185 69,822
Insurance loss reserves 6,834 6,752
Accrued federal income taxes 0 0
Long-term debt classified as current 275,606 270,952
Total current liabilities 694,192 676,901
LONG-TERM DEBT 61,008 64,666
DEFERRED FEDERAL INCOME TAXES 12,914 20,604
OTHER LONG-TERM LIABILITIES 34,807 32,563
Total Liabilities 802,921 794,734
MINORITY INTEREST 429 435
STOCKHOLDERS' EQUITY
Preferred stock 0 0
Common stock 1,869 1,874
Capital surplus 126,694 127,488
Retained earnings 103,803 124,020
Unearned compensation (28,380) (31,003)
Cumulative translation adjustment (19,818) (18,956)
Unrealized loss on investments (1,684) (189)
Total stockholders' equity 182,484 203,234
Total liabilities and stockholders' equity $ 985,834 $ 998,403
SUPPLEMENTAL STOCK INFORMATION
Shares Outstanding at
Mar 31, 1994 Dec 31, 1993
Preferred Stock - Authorized Shares 3,217,495 - -
Common Stock A - Authorized Shares 18,000,000 13,703,131 13,750,863
Common Stock B - Authorized Shares 18,000,000 4,988,507 4,988,507
Par Value of Outstanding Shares
1994 1993
Preferred Stock - $1.00 par value $ - $ -
Common Stock A - $0.10 par value 1,370,313 1,375,086
Common Stock B - $0.10 par value 498,851 498,851
$1,869,164 $1,873,937
The accompanying Notes to Consolidated Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDING MARCH 31, 1994 AND 1993
(in thousands of dollars)
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (20,337) $ (365)
Income from discontinued operations 0 4,179
Cumulative effect of accounting change 0 5,839
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 8,538 8,918
Amortization of ESOP unearned compensation 1,620 126
Other, net (2,184) (3,871)
Changes in assets and liabilities, net of
effects from purchase of businesses-
(Increase) decrease in trade accounts receivables (9,165) (10,349)
Increase (decrease) in allowance for doubtful
accounts 146 (54)
(Increase) decrease in finance receivables 6,673 (3,973)
(Increase) decrease in inventories (7,717) (29,980)
(Increase) decrease in prepaid expenses (2,837) (3,103)
(Increase) decrease in prepaid pension cost (398) (372)
(Increase) decrease in other assets (368) (9,425)
Increase (decrease) in accounts payable (20,474) 13,688
Increase (decrease) in accrued expenses 8,305 10,609
Increase (decrease) in deferred and accrued taxes 29,170 452
Increase (decrease) in insurance loss reserves 1,343 (376)
Increase (decrease) in other long-term liabilities 1,545 (1,572)
Increase (decrease) in unearned premiums (75) 1,502
Net cash provided (used) by operating activities (6,215) (18,127)
Cash flows from investing activities:
Capital expenditures (12,330) (16,956)
Payment for purchases of businesses and
investments, net of cash acquired (24) (2,260)
Proceeds from sale of property, plant, and equip. 2,655 21,927
Proceeds from sale of discontinued operations 25,648 0
(Purchases) sales of marketable securities, net (38,027) 1,407
Net cash provided (used) in investing activities (22,078) 4,118
Cash flows from financing activities:
Proceeds from long-term debt 671 12,710
Principal payments on long-term debt (2,101) (15,091)
Net borrowing under notes payable, net
of effects from purchases of businesses 27,121 21,277
Dividends paid 0 (2,296)
Common stock transactions, net (142) (3,401)
Net cash provided by (used by) financing activities 25,549 13,199
Net (decrease) in cash and equivalents (2,744) (810)
Cash and equivalents at beginning of year 10,131 14,613
Cash and equivalents at MARCH 31 $ 7,387 $ 13,803
- Continuing operations $ 4,961 $ 6,833
- Discontinued operations $ 2,426 $ 6,970
The accompanying Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE> 7
FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1993
The summarized financial information included herein has been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission and properly reflects all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management,
necessary to present a fair statement of the financial results for the
periods covered by this report. The results of operations for the three
months ending March 31, 1994 are not necessarily indicative of the
results to be expected for the entire year.
(1) Significant Accounting and Reporting Policies:
The Company's summarized financial information for the three months
ending March 31, 1994 and 1993, included in this Form 10-Q Report,
has been prepared in accordance with the accounting policies
described in Note 1 of the Notes to Consolidated Financial Statements
appearing in Figgie International Inc.'s Form 10-K for the year
ending December 31, 1993. While Company management believes the
procedures followed in preparing this summarized financial data are
reasonable under the circumstances, the accuracy of the amounts are
in some respects dependent upon facts that will exist, and procedures
that will be performed by the Company, later in the fiscal year.
(2)Inventories:
Inventories are stated at the lower of cost or market and include
cost of material, labor and overhead. The first-in, first-out method
of inventory accounting is used in the determination of cost of
sales.
The Company generally takes physical inventories of its raw
materials, work in process and finished goods between September 30
and December 31. Management believes the cost of taking physical
inventories more frequently would considerably exceed the benefits.
Accordingly, the amounts shown for inventories at March 31, 1994 have
been determined under the Company's regular accounting system, and
management believes that no significant adjustments will arise when
the next physical inventories are taken.
It is impractical to segregate inventories into major classes due to
the nature of the items and the businesses carried on by the Company
and its subsidiaries.
(3)Federal Income Taxes:
The Company provides for Federal income taxes for interim reporting
purposes using applicable statutory tax rates and considering
available tax credits. Effective January 1, 1993, the Company
adopted SFAS No. 109, Accounting for Income Taxes. The effect of
adopting SFAS 109 was to increase first quarter 1993 net income $5.8
million.
<PAGE> 8
Notes to Consolidated Financial Statements - continued
(4) Commitments and Contingent Liabilities:
As reported under Item 3 "Legal Proceedings" in the Company's Form
10-K Annual Report for the fiscal year ending December 31, 1993, the
Company appealed to the United States Court of Appeals for the Ninth
Circuit from a Federal District Court's summary judgement against the
Company in a suit brought by the Federal Trade Commission seeking
consumer redress in connection with the sale of heat detectors
manufactured by the Company's Interstate Engineering division. In a
Per Curiam opinion filed on May 7, 1993, the Court of Appeals
affirmed in part and vacated in part the judgement of the District
Court. The Court of Appeals held that the District Court had
committed error in ordering the Company to pay a minimum amount of
approximately $7,600,000 but held that the Company could be required
to pay refunds to those buyers who, after notification, can make a
valid claim for redress. The Company's subsequent petition for a
writ of certiorari to the United States Supreme Court was denied and
the Company is working with the Federal Trade Commission to implement
a redress program.
In a class action suit filed on April 18, 1994 in the U.S. District
Court for the Northern District of Ohio against the Company and two
former officers and directors, the plaintiff stockholder alleged that
the defendants disseminated false and misleading information to the
investing public concerning the Company's business, management,
financial condition, and future prospects in violation of Section
10(b) and 20(a) of the Securities Exchange Act of 1934. A separate
class action suit was filed by another stockholder on May 11, 1994,
in the same court against the Company, certain former and present
officers and directors, and the Company's auditing firm, setting
forth similar allegations. Both suits seek monetary damages and
costs.
The Company and certain of its subsidiaries are defendants in various
other lawsuits arising in the ordinary course of business. In the
opinion of Company management, the outcome of the litigation will not
have a material effect on the operations or financial position of the
Company. Costs incurred by the Company in the performance of U.S.
Government contracts are subject to audit. In the opinion of
management, the final settlement of these costs will not result in
significant adjustments to recorded amounts.
(5) Reclassification of Amounts:
Certain amounts for 1993 have been reclassified to reflect
comparability with account classifications for 1994.
<PAGE> 9
Notes to Consolidated Financial Statements - continued
(6) Discontinued Operations:
In December of 1993, the Company instituted a divestiture plan as
part of its debt restructuring efforts to dispose of certain
businesses through unrelated sales transactions. These entities
represent separate major lines of business, class of customers, or
non-reportable business segments and, accordingly, have been treated
as discontinued operations as required by generally accepted
accounting principles. As a result of this treatment, the
accompanying consolidated financial statements have been reclassified
to report separately the net assets and operating results of the
following operations: Rawlings Sporting Goods, Sherwood-Drolet Corp.
Ltd., Advance Security, American Lafrance, Safety Supply America,
Medical Devices, Huber/Essick/Mayco Pump, Cardinal Casualty Co.,
Colony Insurance Co., Hamilton Insurance Co., Waite Hill Services.
Net assets of the discontinued operations at March 31, 1994 and
December 31, 1993 consisted primarily of accounts receivable,
inventory and machinery and equipment, offset by insurance loss
reserves related to the insurance companies.
As a group, the discontinued operations represented sales volumes of
$90.4 million for the first three months of 1994 compared to sales of
$100.7 million for the same period in 1993, and are excluded from the
reported sales amounts. Net income from discontinued operations
includes provisions for federal and state taxes at the statutory
rates for the applicable period.
No provision for loss on disposal of discontinued operations has been
provided as the Company expects its divestiture plan to result in a
net gain. During the first quarter of 1994, the Company sold Advance
Security to a privately held corporation.
(7) Liquidity and Restructuring Plans:
As a result of 1993 operating results, the Company was not in
compliance as of March 31, 1994 and December 31, 1993 with certain
financial covenants contained in certain debt agreements, which
permit its lenders to accelerate the due date on its debt. However,
the Company has subsequently received temporary waivers with respect
to those financial covenants. Since permanent waivers or
modifications of these covenants have not been obtained, $276 million
and $271 million of long-term debt has been classified as current for
the periods ended March 31, 1994 and December 31, 1993, respectively.
The Company is currently negotiating with banks party to its
revolving credit facility, other domestic and foreign banks, and
other financial institutions in an effort to finalize a satisfactory
restructuring of its debt. The Company has continued to receive
temporary waivers from its banks. The latest series of waivers
granted to the Company will expire at the end of May, 1994.
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Consolidated net sales in the first three months of 1994 were $181.4
million, which is $338 thousand more than net sales of $181.1 million
reported in the first three months of 1993. Other Expense for the first
three months of 1994 was $2.7 million versus Other Income of $2.1 million
for the same period last year. 1993 contained a $2.7 million recovery on
a cancelled mask contract with the U.S. government, while 1994 reflected
$1.9 million in losses on sales of assets.
Costs of goods and services were $152.3 million (83.9% to sales) in the
first three months of 1994 versus $133.3 million (73.6% to sales) during
the same period in 1993. The major reasons for these variances to prior
year are: (1) increased R&D expenses of approximately $1.0 million for
new product development at Scott Aviation, Fire Protection and Snorkel;
(2) continued volume and production problems at Packaging Systems and
Hartman of approximately $7.3 million, which are only now expected to
begin to show the effects of cost reduction efforts; (3) the revised
accounting practices adopted 12/31/93 of expensing project costs and
world class conversion costs as incurred of approximately $2.3 million;
(4) expenses associated with the pre-production costs of several new
products of $2.6 million; and (5) a correction to contract cost estimates
at Automatic Sprinkler of approximately $2.9 million.
Selling and General and Administrative expenses were $45.7 million or
25.2% to sales for the first three months of 1994 versus $35.5 million or
19.6% to sales in 1993. Selling expenses were generally flat with the
prior period. General and Administrative expenses are up $10.5 million
of which $7.5 million is directly attributed to legal and professional
fees as a result of the debt restructuring and the defense of two
stockholder derivative lawsuits filed in 1993. Interest expense of $10.8
million for the first three months of 1994 was $2.1 million more than
that of the first three months of 1993 due to an increase in debt as well
as an increase in variable interest rates.
As of 12/31/93, the Company reported restructuring costs associated with
the modernization of production facilities, equipment, and support
systems of $51.0 million, $8.8 million, and $5.9 million for the years
1993, 1992, and 1991, respectively. The Company completed the major
portions of this conversion in prior years; however, some work is still
continuing. Charges reflected in the first three months of 1994 are $547
thousand when compared to $5.7 million for the same period last year.
<PAGE> 11
Results of Operations - continued
The loss from continuing operations before provisions for taxes amounted
to $31.2 million in the first three months of 1994 versus a loss of $506
thousand for the same period in 1993. Income from discontinued
operations for the first three months of 1994, including the gain on the
sale of Advance Security, is being deferred on the balance sheet per
generally accepted accounting principles. The Company expects overall
gains on the disposal of the discontinued operations and, therefore, no
provisions for losses are required.
The sale of Advance Security is being concluded and the Company has also
received a letter of intent for the purchase of Safety Supply America.
In addition, there has also been significant activity with all of the
other discontinued units. Rawlings Sporting Goods has filed an S-1
Registration Statement in preparation for an initial public offering and
is also actively engaged in negotiations with private buyers. Numerous
inquiries have also been received on the remaining units which are all
expected to result in purchase offers.
<TABLE>
<CAPTION>
The Company's segment sales for the first three months of 1994 and 1993
are stated below:
Sales to Unaffiliated Customers
(in thousands except for percents)
Three Months Ending March 31
1994 Over Percent
1994 1993 (Under)1993Over (Under)
<S> <C> <C> <C> <C>
Consumer $ 15,900 $ 16,501 $ (601) (3.6%)
Industrial
Fire Protection/Safety/
Security 46,577 49,605 (3,028) (6.1%)
Machinery & Allied
Products 67,038 65,914 1,124 1.7%
Total Industrial 113,615 115,519 (1,904) (1.6%)
Technical 44,771 43,662 1,109 2.5%
Services 7,120 5,386 1,734 32.2%
Total Sales $ 181,406 $ 181,068 $ 338 0.2%
</TABLE>
The Consumer Products segment's net sales were $15.9 million during the
first three months of 1994 versus net sales of $16.5 million during the
same period in 1993. Reduced sales and selling prices from Fred Perry
due primarily to the deepening European recessions continues to be the
major reason for the declines in this segment. Spain and Germany
continue to show very slow recovery, while the U.K. is starting to show
some signs of improvement. Increased sales volumes at Interstate
Engineering (up 8%) and at Taylor Environment (up 17%) have partially
offset the declines at Fred Perry.
<PAGE> 12
Results of Operations - continued
Fire Protection/Safety/Security Product segment's net sales declined $3.0
million or 6.1% during the first three months of 1994 when compared to
net sales for the same period last year. Increased sales volumes from
Scott health and safety products and from the Fire Protection division
were more than offset by sales declines at Automatic Sprinkler. The non-
residential construction market that require fire protection systems
continues to be very soft and is a primary factor affecting Automatic
Sprinkler.
The Machinery and Allied Products segment's net sales were $67.0 million
for the first three months of 1994 versus $65.9 million for the same
period last year. The weak European economy and the closing of selected
facilities has had an adverse effect on the sales of material handling
equipment. Several large distribution orders, earthquake related work in
Los Angeles, and several industrial maintenance contracts are responsible
for increased sales of scaffolding products. Increased sales of
elevating work platforms also contributed to this segment's overall sales
growth.
The Technical Products segment's net sales were $44.8 million for the
first three months of 1994 versus $43.7 million for the same period last
year. This increase in sales is primarily due to increased shipments of
Interstate Electronics' Global Positioning Systems.
The Service segment's net sales for the first three months of 1994 were
$7.1 million versus sales of $5.4 million for the same period in 1993.
This change is due primarily to increased volume at the Financial
Services subsidiary which involves an increase in the vehicle fleet as
well as increases in equipment financing.
<TABLE>
<CAPTION>
The Company's segment operating income for the first three months of 1994
and 1993 are stated below:
Operating Profits
(in thousands except for percents)
Three Months Ending March 31
1994 Over Percent
1994 1993 (Under)1993Over (Under)
<S> <C> <C> <C> <C>
Consumer $ 1,514 $ 1,024 $ 490 47.9%
Industrial
Fire Protection/Safety/
Security (1,236) 2,882 (4,118) (142.9%)
Machinery & Allied
Products (638) 4,365 (5,003) (114.6%)
Total Industrial (1,874) 7,247 (9,121) (125.9%)
Technical (2,380) 6,320 (8,700) (137.7%)
Services 464 1,172 (708) (60.4%)
Total Segments (2,276) 15,763 (18,039) (114.4%)
General Corporate Expenses(18,088) (7,634) (10,454) (136.9%)
Interest Expense, Net (10,821) (8,635) (2,186) (25.3%)
Income before Taxes
on Income $ (31,185) $ (506)$ (30,679) (6063.1%)
</TABLE>
<PAGE> 13
Results of Operations - continued
The Consumer Products segment's operating profits for the first three
months of 1994 were $1.5 million versus profits of $1.0 million for the
same period in 1993. The increase in profits is due partially to better
performance at Fred Perry as a result of cost reduction efforts. In
addition, Fred Perry experienced sales of substandard quality merchandise
and seasonal items in 1993 which occurred at a significantly reduced rate
in 1994.
Fire and Safety Products segment operating losses were $1.2 million for
the first three months of 1994 compared to operating profits of $2.9
during the same period in 1993. The drop in profits is due primarily to
Automatic Sprinkler's volume drop, heavy competition among contractors
for fewer jobs, and a correction of contract cost estimates.
The Machining and Allied Products segment operating loss was $.6 million
for the first three months of 1994 versus operating income of $4.4
million for the same period in 1993. Sales volume reductions and
machinery conversion costs at Packaging Systems are primarily responsible
for the decline. Cost reduction efforts have been implemented and we
expect to see these results in the future reporting periods. Insurance
proceeds from the flood damage at Snorkel Economy have still not been
received, but a settlement is expected in the near future.
The Technical Products segment operating loss was $2.4 million for the
first three months of 1994 versus an operating income of $6.3 for the
same period in 1993. A volume reduction at Scott Aviation and mask
contract recovery proceeds in 1993 contribute to the change in profits
year over year. Continued production problems at Hartman also
contributed to reduced profits; however, cost reduction efforts have been
implemented and are expected to result in future improvements.
The Services segment operating profits were $.5 million for the first
three months of 1994 compared to $1.2 million for the same period in
1993. The decline in profits is due primarily to a decline in oil prices
at the Natural Resources division.
General corporate expenses during the first three months of 1994 were
$18.1 million or $10.5 million over those of the same period last year.
The increase in Corporate expenses is primarily due to a $7.5 million
increase in legal and professional fees as a direct result of debt
restructuring and defense of two stockholder derivative lawsuits.
Interest expense is up $2.2 million over the prior year due to an
increase in debt as well as an increase in variable interest rates.
The effective income tax benefit from continuing operations is 34.7% in
the first three months of 1994 versus a 27.9% tax benefit during the same
period last year.
<PAGE> 14
Liquidity and Capital Commitments
The Company continues to operate under temporary waivers from its lenders
in lieu of compliance with loan requirements. In the absence of the
finalization of a new long-term financing package, the Company is
required under generally accepted accounting principles to classify
substantially all of its long-term debt as a current liability at March
31, 1994 and December 31, 1993.
The Company is continuing to negotiate with banks party to its revolving
credit facility, other domestic and foreign banks, and other financial
institutions in an effort to obtain a satisfactory restructuring of its
debt. As part of its restructuring plan, the Company intends to dispose
of certain businesses under a divestiture plan designed to provide
liquidity to the Company and pay down debt through the use of proceeds
upon sale. During the first quarter, the Advance Security Division was
sold and proceeds retained as marketable securities for debt paydown when
an agreement is reached with the banks.
During the three months ending March 31, 1994, the Company increased its
debt by $25.5 million, realized a recovery of taxes, net of payments, of
$29.2 million, sold businesses and equipment of $28.3 million which,
along with depreciation and amortization of $10.1 million and liquidation
of $6.7 million of finance receivables, were used to purchase marketable
securities of $38.0 million, increase key working capital (accounts
receivable and inventory net of accounts payable) by $37.4 million, make
capital expenditures of $12.3 million and fund a net operating loss of
$20.3 million.
The Company's ability to continue to meet its liquidity requirements is
dependent upon its ability to successfully complete its restructuring
efforts - specifically, finalizing a new long-term financing package and
completion of its divestiture program. The Company continues to make
progress in implementing actions aimed at restoring profitability and
liquidity. Negotiations with certain of the Company's lenders continue
to take place in an effort to finalize a restructuring of its debt
facilities.
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
In two separate suits reported in the Company's 1993 Form 10-K
Annual Report, three stockholders of the Company filed derivative
complaints during 1993 in the Common Pleas Court of Lake County,
Ohio seeking recovery on behalf of the Company for alleged self-
dealing, waste of corporate assets, financial statement over-
statements, gross mismanagement and participation or acquiescence in
such practices by Directors of the Company, all of whom were named
as defendants. The Court consolidated the two suits and
subsequently dismissed them with respect to all defendants. The
plaintiffs have filed a Notice of Appeal. See also Footnote (4) of
Notes to Consolidated Financial Statements.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
See Note (7) Liquidity and Restructuring Plans of Notes to
Consolidated Financial Statements.
ITEM 5 OTHER INFORMATION
A press release is attached as Exhibit 99.
ITEM 6(a) EXHIBITS
Exhibit 99 - Press Release dated May 18, 1994.
ITEM 6(b) REPORTS ON FORM 8-K
8-K filed March 17, 1994.
Item 7(c) Exhibit.
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 hereunto duly authorized.
<TABLE>
<CAPTION>
FIGGIE INTERNATIONAL INC.
<S> <C>
Date: May 23, 1994 /s/
A. C. Hays
(Principal financial and accounting
officer for purposes of this report)
Date: May 23, 1994 /s/
L. A. Harthun
Senior Vice President-International,
General Counsel and Secretary
</TABLE>
<PAGE> 1
EXHIBIT LIST
99 - Press Release dated May 18, 1994.
<PAGE> 1
EXHIBIT 99
Keith Mabee
(216)953-2810 FOR IMMEDIATE RELEASE
FIGGIE INTERNATIONAL'S CHAIRMAN AND CEO RETIRES;
VANNOY NAMED SUCCESSOR; BOARD INITIATES CEO
SEARCH AND NEW STANDING COMMITTEES
WILLOUGHBY, OH, MAY 18, 1994 -- Figgie International Inc.
(NASDA/NMS: FIGIA AND FIGI) today announced that its founder,
Chairman and CEO Harry E. Figgie, Jr. is retiring and will be
succeeded by Vice Chairman Walter M. Vannoy in the Company's
two top leadership posts. Mr. Figgie also resigned from the
Board.
Mr. Figgie informed the Company's Board of Directors that:
"In light of my recent health difficulties, and after 30
years at the helm, it is time for me to step aside so that I
can spend more time with my family and my wide-ranging
personal interests, and in order to facilitate a timely CEO
succession as the Company prepares itself for the future."
The Board acknowledged "Mr. Figgie's many contributions to
the growth and development of the Company over the three
decades he led its diversification into a major Fortune 500
company."
Mr. Vannoy, who has served as a Company director since 1981,
was named vice chairman in February and had previously served
as vice chairman of McDermott International, Inc. and
president and chief operating officer of its Babcock and
Wilcox subsidiary.
"I am deeply committed to leading Figgie International
through the strategic and management transition that the
Board has embarked upon," stated Mr. Vannoy. "We intend to
build a strong leadership team and a people- and results-
driven organization that can carry a more sharply focused
core of businesses to renewed and consistent profitability
and growth."
<PAGE> 2
In related actions, the Figgie Board of Directors:
-Launched a comprehensive search for "an
exceptional chief executive officer candidate
with a strong track record" who would be brought
in to join the senior management team;
-Established three new standing committees of
the Board: Strategic Planning; Management
Development and Compensation; and Operations,
the latter which will oversee implementation of
the Company's major modernization and automation
programs;
-Intensified its efforts to develop a long-term
strategic focus consistent with optimizing
shareholder returns over time; and
-Accepted the resignation of Dr. Harry E.
Figgie, III, as a director of the Company. Dr.
Figgie, who had earlier resigned as an officer
of the Company, cited expanded business
commitments at the Figgie family-owned Clark-
Reliance Corporation and his father's departure
from Figgie International as the key factors
underlying his decision to resign from the
Board.
"We are very appreciative of the consistently strong support
provided by our customers, employees, banks, trade creditors
and investors as we manage through these dynamic changes that
will position us for a more promising future," noted Mr.
Vannoy.
