SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarterly Period Ended April 2, 1995
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________________
to _________________________
Commission File Number 0-17873
GIDDINGS & LEWIS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1643189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
142 Doty Street, Fond du Lac, Wisconsin 54935
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 921-9400
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.
Common Stock Outstanding as of April 2, 1995: 34,402,521 shares
<PAGE>
GIDDINGS & LEWIS, INC.
Form 10-Q Index
For Quarter Ended April 2, 1995
Page
PART I. Financial Information
Item 1. Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Condensed Consolidated Balance Sheets 5
Condensed Consolidated Statement of Changes in
Shareholders' Equity 6
Notes to Condensed Consolidated Financial
Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 9 - 10
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
<PAGE>
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Share and Per Share Data)
(Unaudited)
Three months ended
April 2, April 3,
1995 1994
Net sales $154,576 $123,030
Costs and expenses:
Cost of sales 122,862 94,839
Selling, general and
administrative expenses 15,583 12,885
Depreciation and amortization 4,182 4,084
-------- --------
Total operating expenses 142,627 111,808
-------- --------
Operating income 11,949 11,222
Interest (income)/expense, net 290 (325)
Other (income)/expense (31) 91
-------- --------
Income before provision for income taxes 11,690 11,456
Provision for income taxes 4,594 4,586
-------- --------
Net income $ 7,096 $ 6,870
======== ========
Per common share amounts:
Net income $ .21 $ .20
======== ========
Dividends declared $ .03 $ .03
======== ========
Average number of common
shares outstanding 34,363,937 34,264,485
See accompanying notes.
<PAGE>
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three months ended
April 2, April 3,
1995 1994
Operating activities:
Net income $ 7,096 $ 6,870
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 4,182 4,084
Net changes in working capital items (57,452) 16,519
Other (1,119) 333
-------- --------
Net cash provided (used) by operating
activities (47,293) 27,806
-------- --------
Investing activities:
Additions to property, plant,
and equipment (3,357) (4,501)
Other 933 (278)
-------- --------
Net cash used by investing activities (2,424) (4,779)
-------- --------
Financing activities:
Net increase in notes payable 36,000 -
Proceeds from stock options exercised - 440
Cash dividends (1,032) (1,028)
-------- --------
Net cash provided (used) by financing
activities 34,968 (588)
-------- --------
Effect of exchange rate changes on cash 872 577
-------- --------
Net increase (decrease) in cash and
cash equivalents (13,877) 23,016
Cash and cash equivalents - beginning of
period 24,072 53,877
-------- --------
Cash and cash equivalents - end of period $ 10,195 $ 76,893
======== ========
See accompanying notes.
<PAGE>
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
April 2, December 31,
1995 1994
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 10,195 $ 24,072
Accounts receivable 369,580 343,881
Inventories 82,862 74,823
Deferred income taxes 9,455 9,455
Other current assets 14,572 10,923
-------- --------
Total current assets 486,664 463,154
Fixed assets - net 109,678 107,164
Costs in excess of net acquired assets 84,420 84,997
Other assets 11,138 12,943
Deferred income taxes 18,968 18,968
-------- --------
TOTAL ASSETS $710,868 $687,226
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable 36,000 -
Accounts payable 50,635 76,562
Accrued expenses and other
liabilities 82,436 78,912
-------- --------
Total current liabilities 169,071 155,474
Long-term employee benefits and
other long-term liabilities 45,554 46,454
-------- --------
Total liabilities 214,625 201,928
Contingencies
Shareholders' equity:
Class A preferred stock - -
Common stock 3,440 3,429
Capital in excess of par 326,620 325,063
Retained earnings 164,521 158,457
Cumulative translation adjustment 4,911 174
Unamortized compensation expense (3,249) (1,825)
-------- --------
Total shareholders' equity 496,243 485,298
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $710,868 $687,226
======== ========
See accompanying notes.
<PAGE>
GIDDINGS & LEWIS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED APRIL 2, 1995
(In Thousands, Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Cumulative Unamortized Total
Capital in Retained Translation Compensation Shareholders'
Shares Amount Excess of Par Earnings Adjustment Expense Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 34,294,404 $3,429 $ 325,063 $158,457 $ 174 $ (1,825) $485,298
Net stock award and
options 108,135 11 1,507 0 0 (1,809) (291)
Tax benefit related
to vesting of
restricted stock 50 50
Net income 7,096 7,096
Amortization of
compensation
expense 385 385
Cash dividends (1,032) (1,032)
Translation
adjustment 4,737 4,737
Other (18) 0 0 0
--------- --------- --------- -------- ---------- ----------- ------------
Balance, April 2,
1995 34,402,521 $3,440 $326,620 $164,521 $ 4,911 $ (3,249) $ 496,243
========= ========= ========= ========= ========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
GIDDINGS & LEWIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 2, 1995
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of 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 (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
April 2, 1995 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1994.
The Company is organized into four major operating groups: Automation
Technology, Integrated Automation, Automation Measurement and Control,
and European Operations. The Automation Technology Group is
responsible for the manufacture of cellular and smart manufacturing
systems, automated standalone machine tools, tooling and fixtures, and
remanufacturing. The Integrated Automation Group produces assembly
automation products and systems and flexible transfer lines.
Programmable industrial computers, servo systems, controls, and
measurement products are offered by the Automation Measurement and
Control Group. The European Operations Group offers the Company's
complete product lines through its sales, engineering, manufacturing,
and service facilities in England and Germany.
2. Inventories
April 2, December 31,
1995 1994
(in thousands)
Raw materials $ 37,399 $ 37,166
Work-in-process 33,451 27,568
Finished goods 12,012 10,089
---------- -------
$ 82,862 $ 74,823
========== =======
3. Contingencies
The Company is involved in various environmental matters, including
matters in which the Company and certain of its subsidiaries or
alleged predecessors have been named as potentially responsible
parties under the Comprehensive Environmental Response Compensation
and Liability Act (CERCLA). These matters include a soil and water
contamination matter at its former West Allis, Wisconsin, facility.
In 1992, the Company was notified by the Wisconsin Department of
Natural Resources (WDNR) of contamination at the West Allis site. In
1994, the Company sold most of the site, including the manufacturing
facility. The Company is currently implementing a WDNR approved
clean-up plan on the portion of the site that was not sold.
The Company has established accruals ($12.0 million and $13.8 million
at April 2, 1995 and December 31, 1994, respectively) for all
environmental contingencies of which management is currently aware in
accordance with generally accepted accounting principles. In
establishing these accruals, management considered (a) reports of
environmental consultants retained by the Company, (b) the costs
incurred to date by the Company at sites where clean-up is presently
ongoing and the estimated costs to complete the necessary remediation
work remaining at such sites, (c) the financial solvency, where
appropriate, of other parties that have been responsible for
effecting remediation at specified sites, and (d) the experience of
other parties who have been involved in the remediation of comparable
sites. The accruals recorded by the Company with respect to
environmental matters have not been reduced by potential insurance or
other recoveries and are not discounted. Although the Company has
and will continue to pursue such claims against insurance carriers
and other responsible parties, future potential recoveries remain
uncertain and, therefore, were not recorded as a reduction to the
estimated gross environmental liabilities. Based on the foregoing
and given current information, management believes that future costs
in excess of the amounts accrued on all presently known and
quantifiable environmental contingencies will not be material to the
Company's financial position or results of operations.
In another matter, a Michigan Department of Natural Resources
investigation into alleged environmental violations at the Company's
Menominee, Michigan, facility has resulted in the issuance of a
criminal complaint against the Company and two of its employees. The
complaint generally is focused on alleged releases of hazardous
substances and the alleged illegal treatment and disposal of
hazardous wastes. Two civil lawsuits are also pending which allege
improper disposal and emissions at this facility. The Company is
vigorously defending itself against all charges and allegations.
Information presently available to the Company does not enable it to
reasonably estimate potential civil or criminal penalties, or
remediation costs, if any, related to this matter.
The Company is also involved in other litigation and proceedings,
including product liability claims. In the case of product
liability, the Company is partially self-insured and has accrued for
all claim exposure for which a loss is probable and reasonably
estimable. Based on current information, management believes that
future costs in excess of the amounts accrued for all existing
litigation will not be material to the Company's financial position
or results of operations.
4. Subsequent Event
On April 24, 1995, the Company acquired through a wholly owned
subsidiary all of the issued and outstanding capital stock of Fadal
Engineering Company, Inc. ("Fadal") and the land and building used by
Fadal in the operation of its business. The total cash consideration
paid by the Company at the closing of the acquisition was
$180,193,000. To finance the acquisition, the Company borrowed
$118,000,000 under its existing domestic credit agreement and
$62,193,000 under a new credit facility entered into at the time of
the acquisition. The acquisition of Fadal will be accounted for
under the purchase method of accounting. The Company has filed a
Current Report on Form 8-K with respect to this acquisition, which
filing includes historical financial statements of Fadal as well as
pro forma financial information. Located in Chatsworth, California,
Fadal is principally involved in the design, manufacture and sale of
computer numerically controlled vertical machining centers.
<PAGE>
GIDDINGS & LEWIS, INC.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations for the First Three Months
of 1995 Compared to 1994
The following table sets forth the Company's bookings by operating group
in the period and consolidated backlog at period-end on a quarterly basis
for the period January 1, 1994 through April 2, 1995.
<TABLE>
<CAPTION>
April 3, July 3, Oct. 2, Dec. 31, April 2,
1994 1994 1994 1994 1995
(In Thousands)
<S> <C> <C> <C> <C> <C>
Operating group:
Automation
Technology $ 32,034 $ 31,724 $ 28,973 $ 40,116 $ 41,523
Integrated
Automation 117,610 113,870 94,705 91,226 91,420
European
Operations 6,138 5,771 12,141 8,759 8,680
Automation
Measurement
and Control 13,647 17,831 16,964 17,948 17,741
-------- ------- ------- ------ -------
Consolidated
bookings $169,429 $169,196 $152,783 $158,049 $159,364
======== ======= ======= ======= =======
Consolidated
backlog $431,448 $460,370 $449,969 $422,172 $430,121
======== ======= ======= ======= =======
</TABLE>
Bookings in the first three months of 1995 were $159.4 million compared to
bookings in the first three months of 1994 of $169.4 million. Automation
Technology first quarter bookings for 1995 of $41.5 million increased
29.6% from $32.0 million in the first quarter of 1994 primarily as a
result of continued demand for the new RAM machining centers which were
introduced in the second half of 1994. Integrated Automation bookings of
$91.4 million decreased 22.3% in the first quarter of 1995 from $117.6
million in the first quarter of 1994 due to the timing of order placement
for large automotive contracts. The domestic automotive sector continues
to be a major source for new orders for this group. European Operations
bookings increased 41.4% from $6.1 million in the first quarter of 1994 to
$8.7 million in the first quarter of 1995. European bookings continue to
be impacted by the unfavorable economic conditions and increased
competitive pressure in the Company's European markets. Automation
Measurement and Control bookings of $17.8 million for the first quarter of
1995 increased 30.0% from $13.6 million in the first quarter of 1994.
Much of this increase was attributed to the automotive industry.
Consolidated net sales in the first three months of 1995 totalled $154.6
million compared to $123.0 million in the year earlier period. The
increase in net sales was related to the strong bookings experienced in
the first part of 1994.
In the 1995 period, net sales for Automation Technology of $37.8 million
decreased 9.8% from $41.9 million in the year earlier period. Integrated
Automation net sales of $73.9 million increased 50.1% from $49.3 million.
European Operations sales in the first three months of 1995 were $25.0
million, an increase of 52.0% from $16.4 million in the year earlier
period. Automation Measurement and Control net sales increased 15.8% to
$17.9 million in the 1995 period compared to $15.5 million in the 1994
period.
The consolidated gross margin (before depreciation and amortization)
decreased to 20.5% of sales in the first quarter of 1995, from 22.9% in
the first quarter of 1994. The decrease in the gross margin percentage is
primarily attributable to increased spending in unallocated costs and a
less favorable workload mix.
Selling, general, and administrative expenses (before depreciation and
amortization) decreased as a percentage of sales to 10.1% in the first
three months of 1995 from 10.5% in the year earlier period.
Net interest expense/(income) was $.3 million of income in the first
quarter of 1994 as compared with $.3 million of expense in the first
quarter of 1995. The increase in net interest expense is attributable to
the borrowings under the domestic credit agreement which totalled $36.0
million at April 2, 1995. The increased borrowings related to higher
working capital levels necessary to support automotive contracts in
progress.
The provision for income taxes of $4.6 million for the first quarter of
1995 is based on the estimated annual effective tax rate for 1995. The
Company's effective tax rate for the first three months of 1995 amounted
to 39.3% as compared to 40.0% for the year earlier period.
Liquidity and Capital Resources at April 2, 1995
On April 2, 1995, the Company had $10.2 million of cash and cash
equivalents on hand which was a decrease of $13.9 million from the balance
on hand at the beginning of the year. For the first three months of 1995,
operating activities used $47.3 million of cash. Cash used by working
capital changes totaled $57.5 million due primarily to increased accounts
receivable and decreased accounts payable as a result of progress on long
term contracts and purchases related to those contracts.
Investing activities used $2.4 million which included $3.4 million in
capital expenditures and $1.0 million of proceeds from the sale of assets.
Financing activities provided cash of $35.0 million which included bank
borrowings of $36.0 million less dividend payments of $1.0 million.
<PAGE>
Part II - OTHER INFORMATION
Giddings & Lewis, Inc.
Form 10-Q
April 2, 1995
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during
the quarter ended April 2, 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.
Giddings & Lewis, Inc.
Date: May 12, 1995 /s/ Joseph R. Coppola
Joseph R. Coppola
Chairman and Chief Executive
Officer
Date: May 12, 1995 /s/ Richard C. Kleinfeldt
Richard C. Kleinfeldt
Vice-President - Finance and
Secretary (Chief Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GIDDINGS &
LEWIS' CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-02-1995
<CASH> 10,195
<SECURITIES> 0
<RECEIVABLES> 371,497
<ALLOWANCES> 1,917
<INVENTORY> 82,862
<CURRENT-ASSETS> 486,664
<PP&E> 217,805
<DEPRECIATION> 108,127
<TOTAL-ASSETS> 710,868
<CURRENT-LIABILITIES> 169,071
<BONDS> 0
<COMMON> 3,440
0
0
<OTHER-SE> 492,803
<TOTAL-LIABILITY-AND-EQUITY> 710,868
<SALES> 154,576
<TOTAL-REVENUES> 154,576
<CGS> 122,862
<TOTAL-COSTS> 122,862
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 290
<INCOME-PRETAX> 11,690
<INCOME-TAX> 4,594
<INCOME-CONTINUING> 7,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,096
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
