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SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarter ended March 31, 1996 Commission file number 1-8591
FIGGIE INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
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)
(216) 953-2700
(Registrant's telephone number)
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 and Exchange
Act of 1934 during the preceding 12 months (or 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 last practicable date.
Class Outstanding as of April 8, 1996
Class A Common Stock, par value $.10 per share 13,673,230
Class B Common Stock, par value $.10 per share 4,724,193
18,397,423
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FIGGIE INTERNATIONAL INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION. . . . . . . . . . . . . .3
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 3
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
Summary of Significant Accounting Policies 7
Receivables 8
Inventories 8
Divestitures and Net Assets Related to
Discontinued Operations 9
Income Taxes 10
Credit Facility 11
Long-Term Debt 11
Capital Stock 12
Leases 12
Contingent Liabilities 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
Results of Operations Summary 14
Interstate Electronics Corporation 15
Scott/Taylor Environmental 16
Snorkel 17
Corporate and Unallocated Costs and Expenses 18
Financial Position and Liquidity 19
PART II. OTHER INFORMATION . . . . . . . . . . . . . . 20
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . 21
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . 22
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PART I. FINANCIAL INFORMATION
FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(in thousands, except per share data)
(Unaudited)
1996 1995
Net Sales $101,177 $ 85,266
Cost of Sales 74,162 63,013
Gross Profit on Sales 27,015 22,253
Operating Expenses:
Selling, General and Administrative 14,013 13,830
Research and Development 3,210 3,510
Total Operating Expenses 17,223 17,340
Operating Income 9,792 4,913
Other Expense (Income):
Refinancing Costs 218 4,522
Interest Expense 5,149 9,074
Interest Income (211) (844)
Other, Net 430 199
Income (Loss) before Income Taxes 4,206 (8,038)
Income Taxes - -
Net Income (Loss) $ 4,206 $ (8,038)
Weighted Average Shares 18,791 18,092
Per Share Data
Net Income (Loss) $ .22 $ (0.44)
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(in thousands)
March 31, Dec. 31,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 23,159 $ 25,583
Restricted Cash 219 273
Trade Accounts Receivable, less Allowance
for Uncollectible Accounts of $346 in 1996
and $373 in 1995 64,567 56,668
Inventories 49,875 46,458
Prepaid Expenses 2,611 1,537
Recoverable Income Taxes 12,495 12,495
Net Assets Related to Discontinued Operations 24,003 35,864
Total Current Assets 176,929 178,878
PROPERTY, PLANT AND EQUIPMENT
Land and Land Improvements 52,676 52,633
Buildings and Leasehold Improvements 39,431 39,822
Machinery and Equipment 53,427 51,205
145,534 143,660
Accumulated Depreciation (53,135) (52,935)
92,399 90,725
Property under Capital Leases, less
Accumulated Depreciation of $397
in 1996 and $377 in 1995 322 342
Net Property, Plant and Equipment 92,721 91,067
OTHER ASSETS
Deferred Divestiture Proceeds, Net 28,014 33,935
Prepaid Pension Costs 9,892 9,892
Prepaid Rent on Leased Equipment 6,814 17,075
Intangible Assets 19,250 19,447
Investments 7,649 1,029
Cash Surrender Value of Insurance Policies 6,817 8,748
Prepaid Finance Costs 4,331 4,436
Other 3,555 2,972
Total Other Assets 86,322 97,534
Total Assets $ 355,972 $ 367,479
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(in thousands, except par value)
March 31, Dec. 31,
1996 1995
(Unaudited)
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 28,462 $ 30,512
Accrued Insurance Reserves 11,079 11,113
Accrued Compensation 7,160 8,322
Accrued Interest 9,088 5,097
Accrued Environmental Reserves 4,414 4,754
Accrued Liabilities and Expenses 12,049 9,243
Current Maturities of Long-Term Debt 3,661 19,373
Total Current Liabilities 75,913 88,414
Long-Term Debt 194,424 194,955
Other Non-Current Liabilities 31,125 34,517
Total Liabilities 301,462 317,886
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 Par Value;
Authorized, 3,217 Shares;
Issued and Outstanding, None - -
Class A Common Stock, $.10 Par Value; 1,367 1,365
Authorized, 18,000 Shares;
Issued and Outstanding
1996 - 13,668; 1995 - 13,651
Class B Common Stock, $.10 Par Value; 472 472
Authorized, 18,000 Shares;
Issued and Outstanding
1996 - 4,718; 1995 - 4,718
Capital Surplus 109,238 109,046
Accumulated Deficit (55,802) (60,008)
Unearned Compensation (1,364) (1,340)
Cumulative Translation Adjustment 599 58
Total Stockholders' Equity 54,510 49,593
Total Liabilities and Stockholders' Equity $ 355,972 $ 367,479
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(in thousands)
(Unaudited)
1996 1995
Operating Activities:
Net Income (Loss) $ 4,206 $ (8,038)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Depreciation and Amortization 1,739 1,778
Amortization of Unearned Compensation 140 231
Other, Net 585 634
Changes in Operating Assets and Liabilities
Accounts Receivable (7,899) 917
Inventories (3,417) (3,830)
Prepaid Items (1,074) 3,549
Other Assets 586 3,314
Accounts Payable (2,050) (3,571)
Accrued Liabilities and Expenses 4,600 9,784
Accrued Income Taxes - 13,354
Other Liabilities (2,731) (1,956)
Net Cash (Used) Provided by Operating Activities (5,315) 16,166
Investing Activities:
Capital Expenditures for Continuing Operations (1,560) (2,346)
Capital Expenditures for Discontinued Operations - (11,084)
Proceeds from Sale of Property, Plant and Equipment 727 2,546
Proceeds from Business Divestitures 19,883 46,916
Purchases of Securities by Insurance Subs. - (293)
Net Cash Provided by Investing Activities 19,050 35,739
Financing Activities:
Principal Payments on Debt (16,243) (41,183)
Common Stock Transactions, Net 30 (86)
Net Cash (Used) by Financing Activities (16,213) (41,269)
Net (Decrease) Increase in Cash and Cash Equivalents (2,478) 10,636
Cash and Cash Equivalents at Beginning of Year 25,856 68,300
Cash and Cash Equivalents at End of Period $ 23,378 $ 78,936
- - Continuing Operations - Unrestricted $ 23,159 $ 30,154
- - Continuing Operations - Restricted $ 219 $ 25,302
- - Discontinued Operations $ - $ 23,480
See Notes to Consolidated Financial Statements.
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FIGGIE INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 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 of operations for the
periods covered by this report. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of the results
to be expected for the entire year.
(1) Summary of Significant Accounting Policies:
The financial statements for the three months ended March 31, 1996 and 1995
have 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 1995 Form 10-K.
NEW ACCOUNTING PRONOUNCEMENTS. In 1995, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards ("SFAS") numbers
121 and 123. SFAS 121 establishes accounting standards for the impairment
of long-lived assets, certain identifiable intangibles, and goodwill related
to those assets to be held and used and for long-lived assets and certain
identifiable intangible assets to be disposed of. The Company's adoption
of SFAS 121, effective January 1, 1996, had no effect on the results of
operations, financial position or cash flow. SFAS 123 establishes a fair
value method for accounting for stock-based employee compensation plans
either through recognition or disclosure. The Company will adopt the
disclosure requirement of SFAS 123 in the 1996 annual financial statements.
This adoption will not impact the Company's results of operations, financial
position or cash flow.
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(2) Receivables:
Receivables consist of the following components (in thousands):
3/31/96 12/31/95
U.S. Government
Billed $10,560 $11,604
Unbilled 21,822 16,713
32,382 28,317
Commercial
Billed 32,531 28,724
Allowance for Uncollectible Accounts (346) (373)
$64,567 $56,668
U.S. Government receivables include amounts derived from contracts on which
the Company performs on a prime contractor or subcontractor basis. Unbilled
receivables represent the difference between revenue recognized on a
percentage of completion basis for financial accounting and reporting
purposes and amounts permitted to be billed to customers under contract
terms. These amounts will be billed in subsequent periods based on
provisions of the agreements.
(3) Inventories:
Inventories are summarized as follows (in thousands):
3/31/96 12/31/95
Manufacturing Inventories
Raw Materials $21,472 $21,425
Work in Process 12,748 13,433
Finished Goods 17,959 13,195
Inventory Reserves (2,304) (1,595)
Total Manufacturing Inventories $49,875 $46,458
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(4) Divestitures and Net Assets Related to Discontinued Operations:
During the first quarter of 1996, the Company sold Interstate Engineering
and auctioned off idle equipment. As part of the consideration for
Interstate Engineering, the Company received a $6.0 million class AA limited
partnership interest in the purchaser. The terms of the partnership
agreement require a repayment of the $6.0 million interest on or before
February 28, 2006 and 9% annual interest. The class AA limited partnership
interest is presented within the caption "Investments".
Since the beginning of 1994, the Company has sold twenty-three of the
twenty-four businesses held for sale. The contracts under which the
businesses were divested included representations and warranties, covenants
and indemnification provisions made (a) by the Company to purchasers of the
businesses and (b) by purchasers of businesses to the Company. Each
transaction has contract terms specific to that transaction. The extent of
representations and warranties made ranged from those qualified by time,
knowledge, and dollar materiality to those representations and warranties
which are unqualified. Covenants require the Company to act, or prevent the
Company from acting, in a variety of ways, such as not competing with the
purchasers of a business. Covenants also require the purchasers to act, or
prevent them from acting, in a variety of ways. The duration of covenants
range from those effective for a specified period of time to those which are
indefinite.
Remedies available for breaches of representations and warranties and
covenants range from monetary relief in specific amounts for specific
breaches or violations to unlimited amounts.
Under the contracts, the Company has generally retained liability for events
that occurred prior to sale. The Company believes that it has established
appropriate accruals for losses that may arise, such as workers'
compensation, product liability, general liability, environmental risks and
federal and state tax matters.
The Company has indemnified purchasers and has received indemnifications
from purchasers for a variety of items. In some transactions, a portion of
the purchase price was held back or escrowed at banks to support
indemnification provisions. Such amounts are reflected within the assets
of the Company as deferred divestiture proceeds.
Proceeds and other consideration from divestitures which will be paid to the
Company upon fulfillment of contractual provisions, the passage of time, or
the occurrence of future events have been recorded as non-current assets.
Deferred divestiture proceeds consist of cash held in bank escrow accounts,
cash held back by purchasers, receivables expected from purchasers arising
from final calculations of the purchase price and cash due to the Company
from future tax benefits under a tax sharing agreement with an unaffiliated
public company, Rawlings Sporting Goods, Inc.
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Net assets related to discontinued operations consist primarily of accounts
receivable, inventory and property, plant and equipment, net of liabilities
related to discontinued businesses. As of March 31, 1996, the amount of $24
million represents the net assets of Hartman Electrical, a division of the
Company, approximately 175 installation contracts in process of completion
from the "Automatic" Sprinkler business, oil and gas interests in Illinois,
and former facilities and specialized machinery and equipment of
discontinued business units.
The amounts recorded as deferred divestiture proceeds and net assets related
to discontinued operations are managements' best estimates of the amounts
expected to be realized. The amounts the Company will ultimately realize
could differ materially from the amounts recorded. The Company has a
reserve of $18.0 million against these assets, which is presented as a
deduction from deferred divestiture proceeds.
(5) Income Taxes:
As of December 31, 1995, the Company had $49.2 million of tax carryforward
attributes in excess of current and net deferred tax liabilities. These
excess attributes were not recognized in the financial statements as of
December 31, 1995. For the three-month period ended March 31, 1996, income
taxes of approximately $1.6 million at the statutory rates would have been
provided; however, no income tax provision was recorded as the Company
recognized $1.6 million of the excess tax attributes to offset them.
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(6) Credit Facility:
The Company has a $75 million, three-year revolving credit loan and letter
of credit facility ("Credit Agreement"). Within the Credit Agreement, the
Company can issue up to $60 million in letters of credit. Borrowings are
available up to the lesser of $75 million or a borrowing base which is tied
to eligible receivables, inventory and machinery and equipment, less
outstanding letters of credit.
As of March 31, 1996, $28.3 million of letters of credit were outstanding
under the facility and no borrowings were outstanding ($25.0 million was
available).
The facility is secured by certain accounts receivable, inventory, machinery
and equipment and intangibles. The facility contains various affirmative
and negative covenants, including restrictions on dividends and certain
financial covenants, all of which have been met. The facility expires on
January 1, 1999.
(7) Long-Term Debt:
Total debt consists of the following (in thousands):
3/31/96 12/31/95
Long-Term Debt:
9.875% Senior Notes due October 1, 1999 $174,000 $174,000
10.375% Debentures due April 1, 1998 8,000 8,000
Mortgage Notes 14,316 30,301
Obligations under Capital Lease 1,769 2,027
Total 198,085 214,328
Less - Current Maturities (3,661) (19,373)
Long-Term Debt $194,424 $194,955
Mortgage notes are secured by real property, are due at various dates
through 2009 and bear interest at rates ranging from 7.5% to 10.52%. During
the quarter ended March 31, 1996, $15.7 million of the 10.52% mortgage notes
were paid-off.
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(8) Capital Stock:
Each share of Class A Common Stock is entitled to one-twentieth of one vote
per share, while each share of the Class B Common Stock is entitled to one
vote per share, except, in each case, with respect to shares beneficially
owned by a Substantial Stockholder (as defined in the Company's Restated
Certificate of Incorporation, as amended), in which case the voting rights
of such stock will be governed by the appropriate provisions of the
Company's Restated Certificate of Incorporation.
Earnings per share for the quarters ended March 31, 1996 and 1995 were
calculated using the following share data. Primary weighted-average shares
were used in 1995 as fully diluted shares would have been anti-dilutive.
(in thousands)
1996 1995
Primary Weighted-Average Number of Shares:
Allocated Shares 18,389 18,005
Common Stock Equivalents of Stock Options 324 87
Primary Weighted-Average 18,713 18,092
Fully Diluted Weighted-Average Number of Shares:
Unallocated ESOP shares
1995 196
1996 196
Common Stock Equivalents 78 83
Fully Diluted Weighted-Average 18,791 18,567
(9) Leases:
The Company leases manufacturing equipment under operating leases. The
changes in rental commitments under operating leases during the quarter are
as follows (in millions):
Discontinued Continuing
Operations Operations Total
Rental commitments at
December 31, 1995 $ 16.1 $ 27.4 $ 43.5
Rental payments to lessors (1.2) (1.8) (3.0)
Use of prepaid rent asset to
buy out equipment at
lease-stipulated values (6.5) (3.8) (10.3)
Rental commitments at
March 31, 1996 $ 8.4 $ 21.8 $ 30.2
Leased machinery and equipment that was not sold with divested business
units was auctioned on January 23, 1996. A substantial portion of the
Company's buy out of the lease was funded by application of the prepaid rent
asset. For equipment not sold at the auction, the Company will satisfy the
rental payments through its internal funds until such equipment is sold,
subleased or assigned.
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(10) Contingent Liabilities:
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 Sections 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
and certain former and present officers and directors setting forth similar
allegations. Both suits sought monetary damages and costs and were
consolidated into one case. The parties subsequently entered into a formal
settlement agreement which is described in a notice dated April 22, 1996
sent to the members of the affected stockholder class. Such stockholders
will be afforded an opportunity to object to the settlement. The terms of
the settlement will thereafter be subject to final court approval. The
Company has established an appropriate accrual for this matter.
On December 19, 1994 the Company, its subsidiary Figgie Properties Inc.
and the Richard E. Jacobs Group filed an action in the Common Pleas Court
of Cuyahoga County, Ohio against the City of Cleveland seeking specific
performance of a 1989 Master Development Agreement pertaining to a proposed
real estate project known as Chagrin Highlands. The Company's complaint
also seeks a declaratory judgment that the Master Development Agreement is
in full force and effect and asks for an injunction preventing the City from
interfering with the rights of the plaintiffs under that Agreement as well
as compensatory damages in the amount of $100 million. The City of
Cleveland filed a motion to dismiss the Company's complaint. On May 1,
1995, the Court denied the City's motion to dismiss the complaint and
granted its motion to dismiss the Jacobs Group as a party plaintiff. On
January 24, 1996, the Court denied the City's motion for summary judgment
and granted the Company's motion for summary judgment with respect to
several counts of a counterclaim filed by the City. On May 1, 1996, the
parties reached agreement on the general terms of a settlement and the
litigation was dismissed without prejudice.
Additionally, the Company and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. In the opinion of
management, any liability with respect to these matters will not have a
material adverse effect on the Company's financial statements.
Costs charged by the Company to the U.S. Government in the performance of
U.S. Government contracts are subject to inquiry and audit. Several years
are open. The Company has provided a reasonable reserve for possible
disallowed costs. The Company has been cooperating with the U.S. Government
in two investigations, one involving possible improprieties at a facility
where a division of the Company was a supplier, and the second, a criminal
investigation involving the amount of corporate charges allocated to certain
of the Company's operating units. The Company has furnished documents and
other information and denies any wrongdoing in both investigations.
Nevertheless, the ultimate resolution of these matters could result in
sanctions and damages sought by the government, and affect the Company's
ability to obtain future government contracts.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations Summary
1st Qtr 1st Qtr
(in thousands) 1996 1995 96 vs 95
Net Sales $101,177 $ 85,266 $ 15,911
Cost of Sales 74,162 63,013 11,149
Gross Profit on Sales 27,015 22,253 4,762
% of Net Sales 26.7% 26.1%
Operating Expenses:
Selling, General & Admin. 14,013 13,830 183
Research and Development 3,210 3,510 (300)
Total Operating Expenses 17,223 17,340 (117)
Operating Income (Loss) $ 9,792 $ 4,913 $ 4,879
% of Net Sales 9.7% 5.8%
For the first quarter of 1996, Net Sales increased $15.9 million, or 19%,
to $101.2 million from net sales of $85.3 million for the same period in
1995. Sales increased 38% at Snorkel and 23% at the Scott/Taylor segment.
Gross Profit for the quarter ended March 31 improved $4.8 million to $27.0
million and represented 26.7% of net sales as compared to 26.1% in 1995.
Selling, General and Administrative expenses remained constant in dollars
but decreased as a percentage of net sales. For the quarter, selling,
general and administrative expenses were 13.8% in 1996, compared to 16.2%
in 1995.
Operating Income amounted to $9.8 million in 1996, as compared to operating
income of $4.9 million in 1995.
Segment Information
The Company is a manufacturer of technology-driven products with operations
in three reporting segments, Interstate Electronics Corporation,
Scott/Taylor Environmental, and Snorkel. The results of operations are most
meaningful when analyzed and discussed in this manner.
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Interstate Electronics Corporation
Interstate Electronics develops and produces sophisticated telemetry,
instrumentation, and data recording systems and position measuring systems,
Global Positioning Systems ("GPS") for the U.S. Navy's Polaris/Poseidon,
TRIDENT, and TRIDENT II ships; precise GPS for aircraft and turnkey test
ranges; and GPS for commercial and business aircraft navigation and landing
systems. Interstate Electronics also designs and produces plasma, liquid
crystal, and cathode-ray tube display systems for a variety of shipboard and
aircraft applications. In addition, Interstate Electronics develops
sophisticated bandwidth-on-demand satellite communication modems and
terminals for both government and commercial applications.
The results of operations for Interstate Electronics were as follows:
1st Qtr 1st Qtr
(in thousands) 1996 1995 96 vs 95
Net Sales $ 22,447 $ 24,787 $ (2,340)
Cost of Sales 15,983 17,888 (1,905)
Gross Profit on Sales 6,464 6,899 (435)
% of Net Sales 28.8% 27.8%
Operating Expenses:
Selling, General & Admin. 3,083 2,677 406
Research and Development 1,796 2,187 (391)
Total Operating Expenses 4,879 4,864 15
Operating Income (Loss) $ 1,585 $ 2,035 $ (450)
% of Net Sales 7.1% 8.2%
Discussion of 1996 Compared to 1995:
Net Sales declined due to continued reductions in U.S. Government defense
spending. There were no commercial sales during the periods.
Gross Margin increased due to productivity improvements in the displays
product line, as its gross margin increased 5.6%.
Selling, General and Administrative expenses are higher due to increased
selling and marketing activity for new commercial products, including
salaries, advertising, trade shows and travel.
Research and Development is lower due to the conclusion of the initial
product development phase of two major commercial ventures. The 1995
expenses primarily reflect the costs necessary to finalize the products.
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Scott/Taylor Environmental
Scott manufactures the Scott Air Pak and other life support products for
fire fighting and personal protection against industrial contaminants. The
air-purifying products provide protection against environmental and safety
hazards. Scott manufactures protective breathing equipment, pilot and crew
oxygen masks plus emergency oxygen for passengers on commercial, government
and private aircraft. Scott also manufactures instruments to detect the
presence of combustible or toxic gases and the lack of oxygen.
Taylor manufactures and sells temperature and environmental measuring and
testing devices, such as consumer thermometers, barometers and hygrometers.
In addition to use in scientific laboratories, hospitals and universities,
these devices are used in heating, ventilation and air conditioning (HVAC),
food service and industrial applications.
The results of operations for Scott/Taylor Environmental were as follows:
1st Qtr 1st Qtr
(in thousands) 1996 1995 96 vs 95
Net Sales $ 37,417 $ 30,510 $ 6,907
Cost of Sales 25,540 20,565 4,975
Gross Profit on Sales 11,877 9,945 1,932
% of Net Sales 31.7% 32.6%
Operating Expenses:
Selling, General & Admin. 4,180 3,764 416
Research and Development 702 772 (70)
Total Operating Expenses 4,882 4,536 346
Operating Income (Loss) $ 6,995 $ 5,409 $ 1,586
% of Net Sales 18.7% 17.7%
Discussion of 1996 Compared to 1995:
Net Sales increased 23% due to the impact of emergency escape breathing
equipment sales to the government ($3.1 million in 1996 compared to $.5
million in 1995), increased demand for the oxygen products by aviation
customers and increased demand for breathing apparatus by safety customers.
Gross Margin is down slightly due to a shift in product mix reflected by
increased sales to government and aviation customers.
Selling, General and Administrative expenses have increased slightly but are
lower as a percent of sales when compared to the same period last year.
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Snorkel
The Snorkel division manufacturers self-propelled aerial work platforms such
as telescopic and articulating booms and scissorlifts for use in
construction and maintenance activities. Snorkel also fabricates and
services booms that are mounted on fire apparatus to deliver large
quantities of water from elevated positions.
The results of operations for Snorkel were as follows:
1st Qtr 1st Qtr
(in thousands) 1996 1995 96 vs 95
Net Sales $ 41,313 $ 29,969 $ 11,344
Cost of Sales 32,639 24,560 8,079
Gross Profit on Sales 8,674 5,409 3,265
% of Net Sales 21.0% 18.0%
Operating Expenses:
Selling, General & Admin. 2,679 1,850 829
Research and Development 712 551 161
Total Operating Expenses 3,391 2,401 990
Operating Income (Loss) $ 5,283 $ 3,008 $ 2,275
% of Net Sales 12.8% 10.0%
Discussion of 1996 Compared to 1995:
Net Sales increased 38% compared to last year due to continued high market
demand for aerial work platforms. Domestic sales increased 29%;
international sales increased 81%.
Gross Profit amounts and gross margin percentages improved substantially
compared with 1995 due to increased plant throughput and improved purchasing
and manufacturing efficiencies in the scissorlift line.
Selling, General and Administrative expenses increased due to additional
selling costs related to the increased sales volume.
Research and Development expenses increased due to product development
expenditures for AWPs and fire service products.
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Corporate and Unallocated Costs and Expenses
Corporate activity and unallocated costs and expenses were as follows:
1st Qtr 1st Qtr
(in thousands) 1996 1995 96 vs 95
Selling, General & Admin. $ 4,071 $ 5,539 $(1,468)
Other Expenses (Income):
Refinancing Costs 218 4,522 (4,304)
Interest Expense 5,149 9,074 (3,925)
Interest Income (211) (844) 633
Other, Net 430 199 231
Discussion of 1996 Compared to 1995:
Selling, General and Administrative expenses are down significantly in 1996.
Reflected in these reductions are the impact of the 1995 cutback of
corporate staff, a decrease in travel and other expenses associated with
divestitures and numerous other cost-cutting measures.
Refinancing Costs are down significantly because the principal 1995 expenses
were for lender fees related to the Override Agreement which was paid-off
at the end of 1995. The 1996 costs relate to the $75 million credit
facility.
Interest Expense is down significantly due to significantly lower levels of
bank and mortgage debts outstanding.
The Company has sufficient loss carryforwards and credits to offset all of
its U.S. regular and alternative minimum taxes otherwise payable and,
accordingly, has recorded no income tax provision.
<PAGE>
<PAGE>19
Financial Position and Liquidity
Accounts Receivable at March 31, 1996 are $64.6 million, compared to $56.7
million as of the end of 1995. Increased Snorkel and Scott sales account
for the increase.
Inventories increased by $3.4 million due to work-in-process production and
finished goods levels to fill order backlog for Scott and Snorkel customers.
Operations required $5.3 million, principally for working capital
requirements. The proceeds from divestitures and asset sales generated
$20.6 million which was used to pay down $16.2 million of debt since year-
end 1995.
Expenditures for property, plant and equipment were $1.6 million in the
first quarter of 1996. 1996 expenditures were principally for machinery and
equipment and tooling related to the production of products. Capital
expenditures in 1996 are expected to be approximately $8 million and are
expected to be funded from internally generated funds and the $75 million
credit facility.
Liquidity is provided by the Company's cash and cash equivalents,
divestiture proceeds and the $75 million credit facility entered into on
December 19, 1995; $25.0 million was available at March 31, 1996 under the
facility.
The Company intends to sell the business and assets whose net assets are
presented in the Company's balance sheet as Net Assets Related to
Discontinued Operations and to use a substantial portion of those proceeds
to further reduce debt throughout 1996.
The Company's adoption on January 1, 1996 of the new accounting standard for
the impairment of long-lived assets had no effect on the results of
operations, financial position or cash flow. The Company will adopt the
disclosure requirement of the new accounting principle for stock-based
employee compensation plans in its 1996 annual financial statements.
<PAGE>
<PAGE>20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 19, 1994 the Company, its subsidiary Figgie Properties Inc.
and the Richard E. Jacobs Group filed an action in the Common Pleas
Court of Cuyahoga County, Ohio against the City of Cleveland seeking
specific performance of a 1989 Master Development Agreement pertaining
to a proposed real estate project known as Chagrin Highlands. The
Company's complaint also seeks a declaratory judgment that the Master
Development Agreement is in full force and effect and asks for an
injunction preventing the City from interfering with the rights of the
plaintiffs under that Agreement as well as compensatory damages in the
amount of $100 million. The City of Cleveland filed a motion to dismiss
the Company's complaint. On May 1, 1995, the Court denied the City's
motion to dismiss the complaint and granted its motion to dismiss the
Jacobs Group as a party plaintiff. On January 24, 1996, the Court
denied the City's motion for summary judgment and granted the Company's
motion for summary judgment with respect to several counts of a
counterclaim filed by the City. On May 1, 1996, the parties reached
agreement on the general terms of a settlement and the litigation was
dismissed without prejudice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter
Form 8-K dated March 1, 1996, filed on March 15, 1996, under Items
2 and 7.
<PAGE>
<PAGE>21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Figgie International Inc. has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FIGGIE INTERNATIONAL
By: /s/ Steven L. Siemborski
Steven L. Siemborski
Senior Vice President and
Chief Financial Officer
(Duly Authorized and
Principal Financial Officer)
Date: May 6, 1996
<PAGE>
<PAGE>22
EXHIBIT INDEX
27.0 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000720032
<NAME> FIGGIE INTERNATIONAL
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 23,378
<SECURITIES> 0
<RECEIVABLES> 64,913
<ALLOWANCES> 346
<INVENTORY> 49,875
<CURRENT-ASSETS> 176,929
<PP&E> 146,253
<DEPRECIATION> 53,532
<TOTAL-ASSETS> 355,972
<CURRENT-LIABILITIES> 75,913
<BONDS> 194,424
<COMMON> 1,839
0
0
<OTHER-SE> 52,671
<TOTAL-LIABILITY-AND-EQUITY> 355,972
<SALES> 101,177
<TOTAL-REVENUES> 101,177
<CGS> 74,162
<TOTAL-COSTS> 91,385
<OTHER-EXPENSES> 648
<LOSS-PROVISION> 44
<INTEREST-EXPENSE> 4,938
<INCOME-PRETAX> 4,206
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,206
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,206
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
